As filed with the Securities and Exchange Commission on
April 30, 1998
(File No. 2-17613)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 99 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ X ]
IVY FUND
(Exact Name of Registrant as Specified in Charter)
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 777-6472
C. William Ferris
Mackenzie Investment Management Inc.
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Name and Address of Agent for Service)
Copies to:
Joseph R. Fleming, Esq.
Dechert Price & Rhoads
Ten Post Office Square, South - Suite 1230
Boston, MA 02109
[ X ] It is proposed that this Post-Effective Amendment
will
become effective on April 30, 1998 pursuant to
paragraph
(b) of Rule 485.
[ ] This Post-Effective Amendment designates a new
effective date for a previously filed post-effective
amendment.
Title of Securities Being Registered: Shares of Beneficial
Interest, No Par Value Per Share
THIS POST-EFFECTIVE AMENDMENT NO. 99 IS BEING FILED IN ORDER TO
UPDATE THE FINANCIAL AND RELATED INFORMATION FOR THE FOLLOWING
SEVENTEEN SERIES OF IVY FUND: IVY ASIA PACIFIC FUND, IVY BOND
FUND, IVY CANADA FUND, IVY CHINA REGION FUND, IVY DEVELOPING
NATIONS FUND, IVY GLOBAL FUND, IVY GLOBAL NATURAL RESOURCES FUND,
IVY GLOBAL SCIENCE & TECHNOLOGY FUND, IVY GROWTH FUND, IVY GROWTH
WITH INCOME FUND, IVY INTERNATIONAL FUND, IVY INTERNATIONAL FUND
II, IVY INTERNATIONAL SMALL COMPANIES FUND, IVY MONEY MARKET
FUND, IVY PAN-EUROPE FUND, IVY SOUTH AMERICA FUND AND IVY US
EMERGING GROWTH FUND. THE PROSPECTUSES AND STATEMENTS OF
ADDITIONAL INFORMATION THAT ARE INCLUDED IN THIS POST-EFFECTIVE
AMENDMENT NO. 99 ARE TO BE USED CONCURRENTLY WITH AND SEPARATELY
FROM THE CURRENTLY EFFECTIVE PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FOR IVY HIGH YIELD FUND, WHICH ARE NOT
INCLUDED IN, BUT ARE INCORPORATED BY REFERENCE TO, THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 99 contains the Prospectuses
and Statements of Additional Information ("SAIs") for the
following seventeen series of Ivy Fund (the "Trust"): (i) the
Prospectuses and SAIs relating to the Class A, Class B, Class C
and Class I, and to the Advisor Class shares, respectively, of
Ivy Bond Fund, Ivy Growth Fund, Ivy Growth with Income Fund and
Ivy US Emerging Growth Fund; (ii) the Prospectuses and SAIs
relating to the Class A, Class B, Class C and Class I, and to the
Advisor Class shares, respectively, of Ivy Asia Pacific Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Fund, Ivy
International Fund II, Ivy International Small Companies Fund,
Ivy Pan-Europe Fund and Ivy South America Fund; and (iii) the
Prospectus and Statement of Additional Information relating to
Ivy Money Market Fund.
ITEMS REQUIRED BY FORM N-1A
CLASS A, B, C, AND I SHARES:
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: Not Applicable
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives
and Policies; Risk Factors and Investment Techniques;
Special Risk Considerations; Appendix A
5 MANAGEMENT OF THE FUND: Organization and Management of the
Fund; Investment Manager; Transfer Agent; Fund
Administration and Accounting
6 CAPITAL STOCK AND OTHER SECURITIES: Performance Data;
Dividends and Taxes; Choosing a Distribution Option;
Shareholder Inquiries; Signature Guarantees; Consolidated
Account Statements
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares;
How Your Purchase Price is Determined; How the Fund Values
its Shares; Initial Sales Charge Alternative--Class A
Shares; Contingent Deferred Sales Charge Alternative--Class
A Shares; Qualifying for a Reduced Sales Charge; Contingent
Deferred Sales Charge Alternative--Class B and Class C
Shares; Automatic Investment Method; Retirement Plans
8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum
Account Balance Requirements; Tax Identification Number;
Certificates; Exchange Privilege; Systematic Withdrawal Plan
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment Objectives and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives
and Policies; Investment Restrictions; Additional
Restrictions; Appendix A
14 MANAGEMENT OF THE FUND: Trustees and Officers; Investment
Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Trustees and Officers; Capitalization and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage
Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and
Voting Rights; Conversion of Class B Shares
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other Services
22 CALCULATION OF PERFORMANCE DATA: Performance Information
23 FINANCIAL STATEMENTS: Financial Statements
ADVISOR CLASS SHARES:
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: Not Applicable
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives
and Policies; Risk Factors and Investment Techniques;
Special Risk Considerations; Appendix A
5 MANAGEMENT OF THE FUND: Organization and Management of the
Fund; Investment Manager; Transfer Agent; Fund
Administration and Accounting
6 CAPITAL STOCK AND OTHER SECURITIES: Performance Data;
Dividends and Taxes; Choosing a Distribution Option;
Shareholder Inquiries; Signature Guarantees; Consolidated
Account Statements
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares;
How Your Purchase Price is Determined; How the Fund Values
its Shares; Automatic Investment Method; Retirement Plans
8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum
Account Balance Requirements; Tax Identification Number;
Certificates; Exchange Privilege; Systematic Withdrawal Plan
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment Objectives and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives
and Policies; Investment Restrictions; Additional
Restrictions; Appendix A
14 MANAGEMENT OF THE FUND: Trustees and Officers; Investment
Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Trustees and Officers; Capitalization and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage
Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and
Voting Rights
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other Services
22 CALCULATION OF PERFORMANCE DATA: Performance Information
23 FINANCIAL STATEMENTS: Financial Statements
<PAGE> 1
April 30, 1998
Ivy
U.S. Equity
and Fixed
Income
Funds
- ----------
Prospectus
- ----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
IVY FUNDS(R)
Ivy Fund (the "Trust") is a registered investment company currently
consisting of eighteen separate portfolios. The Class A, Class B, Class C and
Class I (if applicable) shares of four of these portfolios, as identified below
(the "Funds"), are described in this Prospectus. The Funds' Advisor Class
shares are described in a separate prospectus dated April 30, 1998. Each Fund
has its own investment objectives and policies, and your interest is limited
to the Fund in which you own shares.
The four Ivy U.S. equity and fixed income funds are:
Ivy Bond Fund
Ivy Emerging Growth Fund
Ivy Growth Fund
Ivy Growth with Income Fund
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. Please read it carefully and
retain it for future reference. Additional information about the Funds is
contained in the Statement of Additional Information for the Funds dated April
30, 1997 (the "SAI"), which has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus. The
SAI is available upon request and without charge from the Trust at the
Distributor's address and telephone number below. The SEC maintains a web site
(http://www.sec.gov) that contains the SAI and other material incorporated by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Information . . . . . . . . . . . . . . . . 2
The Funds' Financial Highlights . . . . . . . . . . 5
Investment Objectives and Policies . . . . . . . . 9
Risk Factors and Investment Techniques . . . . . . 10
Organization and Management of the Funds . . . . . 12
Investment Manager . . . . . . . . . . . . . . . . 12
Fund Administration and Accounting . . . . . . . . 13
Transfer Agent . . . . . . . . . . . . . . . . . . 13
Alternative Purchase Arrangements . . . . . . . . . 13
Dividends and Taxes . . . . . . . . . . . . . . . . 14
Performance Data . . . . . . . . . . . . . . . . . 14
How to Buy Shares . . . . . . . . . . . . . . . . . 15
How Your Purchase Price is Determined . . . . . . . 15
How Each Fund Values Its Shares . . . . . . . . . . 15
Initial Sales Charge Alternative-Class A Shares . . 15
Contingent Deferred Sales Charge-Class A Shares . . 16
Qualifying for a Reduced Sales Charge . . . . . . . 16
Contingent Deferred Sales Charge Alternative-
Class B and Class C Shares . . . . . . . . . . 17
How to Redeem Shares . . . . . . . . . . . . . . . 18
Minimum Account Balance Requirements . . . . . . . 19
Signature Guarantees . . . . . . . . . . . . . . . 19
Choosing a Distribution Option . . . . . . . . . . 19
Tax Identification Number . . . . . . . . . . . . . 19
Certificates . . . . . . . . . . . . . . . . . . . 19
Exchange Privilege . . . . . . . . . . . . . . . . 20
Reinvestment Privilege . . . . . . . . . . . . . . 20
Systematic Withdrawal Plan . . . . . . . . . . . . 20
Automatic Investment Method . . . . . . . . . . . . 21
Consolidated Account Statements . . . . . . . . . . 21
Retirement Plans . . . . . . . . . . . . . . . . . 21
Shareholder Inquiries . . . . . . . . . . . . . . . 21
Account Application . . . . . . . . . . . . . . . . 23
</TABLE>
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Chairman Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Keith J. Carlson, President Services Corp. 700 South Federal Highway
Keith J. Carlson James W. Broadfoot, Vice President P.O. Box 3022 Boca Raton, FL 33432
Stanley Channick C. William Ferris, Boca Raton, FL 33431-0922 1-800-456-5111
Frank W. DeFriece, Jr. Secretary/Treasurer 1-800-777-6472
Roy J. Glauber DISTRIBUTOR
Michael G. Landry LEGAL COUNSEL AUDITORS Ivy Mackenzie
Joseph G. Rosenthal Dechert Price & Rhoads Coopers & Lybrand L.L.P. Distributors, Inc.
Richard N. Silverman Boston, MA Ft. Lauderdale, FL Via Mizner Financial Plaza
J. Brendan Swan 700 South Federal Highway
CUSTODIAN Boca Raton, FL 33432
Brown Brothers Harriman & Co. 1-800-456-5111
Boston, MA
</TABLE>
1
<PAGE> 2
EXPENSE INFORMATION
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in each Fund. The information is based on each Fund's expenses during
fiscal year 1997.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MAXIMUM SALES LOAD MAXIMUM CONTINGENT
IMPOSED ON PURCHASES DEFERRED SALES CHARGE
(AS A % OF (AS A % OF ORIGINAL
OFFERING PRICE) PURCHASE PRICE)
-------------------- ---------------------
<S> <C> <C>
IVY BOND FUND
Class A................................................... 4.75%(1) None(2)
Class B................................................... None 5.00%(3)
Class C................................................... None 1.00%(4)
Class I................................................... None None
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US EMERGING GROWTH FUND
Class A................................................... 5.75%(1) None(2)
Class B................................................... None 5.00%(3)
Class C................................................... None 1.00%(4)
</TABLE>
None of the Funds charges a redemption fee, an exchange fee, or a sales load on
reinvested dividends.
- ---------------
<TABLE>
<S> <C>
(1) Class A shares may be purchased under a variety of plans
that provide for the reduction or elimination of the sales
charge. See "Initial Sales Charge Alternative -- Class A
Shares" and "Qualifying for a Reduced Sales Charge."
(2) A contingent deferred sales charge ("CDSC") may apply to the
redemption of Class A shares that are purchased without an
initial sales charge. See "Purchases of Class A Shares at
Net Asset Value" and "Contingent Deferred Sales
Charge -- Class A Shares."
(3) The maximum CDSC on Class B shares applies to redemptions
during the first year after purchase. The charge declines to
4% during the second year; 3% during the third and fourth
years; 2% during the fifth year; 1% during the sixth year;
and 0% in the seventh year and thereafter.
(4) The CDSC on Class C shares applies to redemptions during the
first year after purchase.
</TABLE>
2
<PAGE> 3
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
12B-1 SERVICE/ TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES FEES EXPENSES EXPENSES
---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
IVY BOND FUND
Class A................................................... 0.72% 0.25% 0.50% 1.47%
Class B................................................... 0.72% 1.00%(1) 0.49% 2.21%
Class C................................................... 0.72% 1.00%(1) 0.48% 2.20%
Class I................................................... 0.72% 0.00% 0.41%(2) 1.13%
IVY GROWTH FUND
Class A................................................... 0.85% 0.05%(3) 0.48% 1.38%
Class B................................................... 0.85% 1.00%(1) 0.45% 2.30%
Class C................................................... 0.85% 1.00%(1) 0.48% 2.33%
IVY GROWTH WITH INCOME FUND
Class A................................................... 0.75% 0.21%(3) 0.63% 1.59%
Class B................................................... 0.75% 1.00%(1) 0.56% 2.31%
Class C................................................... 0.75% 1.00%(1) 0.48% 2.23%
IVY US EMERGING GROWTH FUND
Class A................................................... 0.85% 0.25% 0.57% 1.67%
Class B................................................... 0.85% 1.00%(1) 0.58% 2.43%
Class C................................................... 0.85% 1.00%(1) 0.54% 2.39%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Long-term investors may, as a result of the Fund's 12b-1
fees, pay more than the economic equivalent of the maximum
front-end sales charge permitted by the Conduct Rules of the
National Association of Securities Dealers, Inc. ("NASD").
(2) "Other Expenses" of Class I shares are lower than such
expenses for Class A, Class B and Class C shares. See "Fund
Administration and Accounting" in this Prospectus and
"Transfer Agent" in the SAI.
(3) Rule 12b-1 Service Fees paid by Class A shares may increase,
but are subject to a maximum of 0.25%. See "Alternative
Purchase Arrangements."
</TABLE>
3
<PAGE> 4
EXAMPLES
The following table lists the expenses an investor would pay on a $1,000
investment, assuming (1) 5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These examples further assume
reinvestment of all dividends and distributions, and that the percentage amounts
under "Total Fund Operating Expenses" above remain the same each year. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
IVY BOND FUND
Class A*.................................................. $62 $ 92 $124 $215
Class B................................................... $72(1) $ 99(2) $138(3) $236(4)
Class B (no redemption)................................... $22 $ 69 $118 $236(4)
Class C................................................... $32(5) $ 69 $118 $253
Class C (no redemption)................................... $22 $ 69 $118 $253
Class I***................................................ $12 $ 39 $ 67 $148
IVY GROWTH FUND
Class A**................................................. $71 $ 99 $129 $214
Class B................................................... $73(1) $102(2) $143(3) $240(4)
Class B (no redemption)................................... $23 $ 72 $123 $240(4)
Class C................................................... $34(5) $ 73 $125 $267
Class C (no redemption)................................... $24 $ 73 $125 $267
IVY GROWTH WITH INCOME FUND
Class A**................................................. $73 $105 $139 $236
Class B................................................... $73(1) $102(2) $144(3) $247(4)
Class B (no redemption)................................... $23 $ 72 $124 $247(4)
Class C................................................... $33(5) $ 70 $119 $256
Class C (no redemption)................................... $23 $ 70 $119 $256
IVY US EMERGING GROWTH FUND
Class A**................................................. $74 $107 $143 $244
Class B................................................... $75(1) $106(2) $150(3) $258(4)
Class B (no redemption)................................... $25 $ 76 $130 $258(4)
Class C................................................... $34(5) $ 75 $128 $273
Class C (no redemption)................................... $24 $ 75 $128 $273
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Assumes deduction of the maximum 4.75% initial sales charge
at the time of purchase and no deduction of a CDSC at the
time of redemption.
** Assumes deduction of the maximum 5.75% initial sales charge
at the time of purchase and no deduction of a CDSC at the
time of redemption.
*** Class I shares are not subject to an initial sales charge at
the time of purchase, nor are they subject to the deduction
of a CDSC at the time of redemption.
(1) Assumes deduction of a 5% CDSC at the time of redemption.
(2) Assumes deduction of a 3% CDSC at the time of redemption.
(3) Assumes deduction of a 2% CDSC at the time of redemption.
(4) Assumes conversion to Class A shares at the end of the
eighth year, and therefore reflects Class A expenses for
years nine and ten.
(5) Assumes deduction of a 1% CDSC at the time of redemption.
</TABLE>
The information presented in the table does not reflect the charge of $10
per transaction that would apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more detailed discussion of the
Funds' fees and expenses, see the following sections of this Prospectus:
"Investment Manager" and "Fund Administration and Accounting," and the following
section of the SAI: "Investment Advisory and Other Services."
4
<PAGE> 5
THE FUNDS' FINANCIAL HIGHLIGHTS
Unless otherwise noted, the tables that follow are for fiscal periods ending
December 31 of each year. The accounting firm of Coopers & Lybrand L.L.P. has
audited Ivy Bond Fund and Ivy US Emerging Growth Fund since inception, and Ivy
Growth Fund and Ivy Growth with Income Fund since December 31, 1992. Their
report is included in the Funds' Annual Reports, which are incorporated by
reference into the SAI. The information for Ivy Growth Fund and Ivy Growth with
Income Fund for fiscal periods prior to December 31, 1992 was audited by other
independent accountants. The Funds' Annual Reports contain additional
information about each Fund's performance, including a comparison to an
appropriate securities index. For a copy of your Fund's Annual Report, call
1-800-777-6472.
Expense and income ratios have been annualized for periods of less than one
year. Beginning December 31, 1996, portfolio turnover rates have not been
annualized for periods of less than one year. Total returns do not reflect sales
charges, and are not annualized for periods of less than one year (unless
otherwise noted). In addition, for fiscal years beginning on or after September
1, 1995, registered investment companies are required to disclose average
commission rates per share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund depending on the mix
of trades executed in various markets where trading practices and commission
rate structures may differ.
As of December 31, 1997, no Class I shares of Ivy Bond Fund had been issued.
Accordingly, no financial information for these shares is presented below.
IVY BOND FUND(F)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------
1997 1996 1995 1994(A) 1994(B) 1993(B) 1992(B)
SELECTED PER SHARE DATA --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61
-------- -------- -------- -------- -------- -------- --------
Income (loss) from investment
operations
Net investment income............ .80 .72 .67(e) .33(e) .63 .55 .63(e)
Net realized and unrealized gain
(loss) on investments........... .42 .03 .84 (.29) (.60) 1.00 .73
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations................... 1.22 .75 1.51 .04 .03 1.55 1.36
-------- -------- -------- -------- -------- -------- --------
Less distributions
From net investment income....... .80 .72 .63 .32 .61 .64 .63
In excess of net investment
income.......................... -- .01 -- -- -- -- --
From net realized gain........... -- -- -- -- .38 .52 .25
In excess of net realized gain... -- -- -- .09 -- -- --
From capital paid-in............. -- -- .11 -- -- -- .14
-------- -------- -------- -------- -------- -------- --------
Total distributions........... .80 .73 .74 .41 .99 1.16 1.02
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period..... $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95
======== ======== ======== ======== ======== ======== ========
Total return(%).................... 11.87 8.06 17.41 .43 .00 16.29 14.77
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $106,497 $ 97,881 $108,840 $110,232 $120,073 $132,721 $102,328
Ratio of expenses to average net
assets
With expense reimbursement(%)..... -- -- 1.54 1.50 -- -- 1.50
Without expense
reimbursement(%)................. 1.47 1.56 1.54 1.52 1.45 1.49 1.55
Ratio of net investment income to
average net assets(%)............. 7.08 7.36 7.09(e) 6.92(e) 6.19 6.42 6.92(e)
Portfolio turnover rate(%)......... 71 90 93 44 78 134 129
<CAPTION>
CLASS A
------------------------------------------------
1991(B) 1990(B) 1989(B) 1988(B)
SELECTED PER SHARE DATA ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 9.84 $10.59 $ 9.99 $ 9.39
------ ------- ------ ------
Income (loss) from investment
operations
Net investment income............ .62(e) .65(e) .77(e) .58(e)
Net realized and unrealized gain
(loss) on investments........... .10 (.40) .75 .81
------ ------ ------ ------
Total from investment
operations................... .72 .25 1.52 1.39
------ ------ ------ ------
Less distributions
From net investment income....... .62 .65 .79 .60
In excess of net investment
income.......................... -- -- -- --
From net realized gain........... .13 -- -- .19
In excess of net realized gain... -- -- -- --
From capital paid-in............. .20 .35 .13 --
------ ------ ------ ------
Total distributions........... .95 1.00 .92 .79
------ ------ ------ ------
Net asset value, end of period..... $ 9.61 $ 9.84 $10.59 $ 9.99
====== ====== ====== ======
Total return(%).................... 7.58 2.54 16.12 16.31
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $92,687 $70,670 $20,753 $5,075
Ratio of expenses to average net
assets
With expense reimbursement(%)..... 1.50 1.36 .20 1.37
Without expense
reimbursement(%)................. 1.65 1.73 2.04 4.61
Ratio of net investment income to
average net assets(%)............. 6.77(e) 6.64(e) 8.08(e) 5.15(e)
Portfolio turnover rate(%)......... 118 -- -- 145
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------------ ----------------------
1997 1996 1995 1994(A) 1994(C) 1997 1996(D)
SELECTED PER SHARE DATA ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 9.82 $ 9.82 $ 9.44
------- ------ ------ ------ ------ ------ ------
Income (loss) from
investment operations
Net investment income..... .68 .64 .60(e) .30(e) .10 .64 .39
Net realized and
unrealized gain (loss) on
investments.............. .46 .04 .84 (.29) (.32) .48 .43
------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ 1.14 .68 1.44 .01 (.22) 1.12 .82
------- ------ ------ ------ ------ ------ ------
Less distributions
From net investment
income................... .72 .64 .56 .29 .14 .70 .39
In excess of net
investment income........ -- .02 -- -- -- -- .05
From net realized gain.... -- -- -- -- .08 -- --
In excess of net realized
gain..................... -- -- -- .09 -- -- --
From capital paid-in...... -- -- .11 -- -- -- --
------- ------ ------ ------ ------ ------ ------
Total distributions.... .72 .66 .67 .38 .22 .70 .44
------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period..................... $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $10.24 $ 9.82
======= ====== ====== ====== ====== ====== ======
Total return(%)............. 11.12 7.25 16.54 .06 (2.24) 11.11 8.81
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)............. $18,499 $5,300 $5,184 $2,420 $ 761 $6,580 $ 618
Ratio of expenses to average
net assets
With expense
reimbursement(%).......... -- -- 2.29 2.25 -- -- --
Without expense
reimbursement(%).......... 2.21 2.29 2.29 2.27 2.20 2.20 2.35
Ratio of net investment
income to average net
assets(%).................. 6.35 6.62 6.34(e) 6.17(e) 5.44 6.35 6.56
Portfolio turnover
rate(%).................... 71 90 93 44 78 71 90
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) For the six months ended December 31, 1994.
(b) For the year ended June 30.
(c) From April 1, 1994 (commencement of operations) to June 30,
1994.
(d) From April 30, 1996 (commencement of operations) to December
31, 1996.
(e) Net investment income is net of expenses reimbursed by
manager.
(f) Since January 1, 1995, Ivy Bond Fund's adviser has been IMI.
Prior to that date, the Fund's adviser was MIMI.
</TABLE>
5
<PAGE> 6
IVY GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
SELECTED PER SHARE DATA -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91 $ 14.41
-------- -------- -------- -------- -------- -------- --------
Income (loss) from investment
operations
Net investment income........... .02 .02(a) .05(a) .05(a) .10(a) .17(a) .27
Net realized and unrealized gain
(loss) on investment
transactions................... 1.98 2.86 3.73 (.49) 1.74 .70 4.12
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations................... 2.00 2.88 3.78 (.44) 1.84 .87 4.39
-------- -------- -------- -------- -------- -------- --------
Less distributions
From net investment income...... .02 .02 .02 .05 .10 .15 .27
In excess of net investment
income......................... .13 .11 -- -- -- -- --
From net realized gain.......... 1.81 1.74 .89 .74 1.58 2.65 1.62
In excess of net realized
gain........................... -- -- .03 -- -- -- --
From capital paid-in............ -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions............ 1.96 1.87 .94 .79 1.68 2.80 1.89
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period..... $ 17.80 $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91
======== ======== ======== ======== ======== ======== ========
Total return(%).................... 11.69 17.22 27.33 (2.97) 12.29 5.21 30.76
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $320,000 $314,908 $289,954 $231,446 $268,533 $226,068 $231,706
Ratio of expenses to average net
assets
With expense reimbursement(%)..... -- 1.45 1.59 1.38 1.33 1.32 --
Without expense
reimbursement(%)................ 1.38 1.45 1.60 1.49 1.43 1.40 1.29
Ratio of net investment income to
average net assets(%)............. .13 .13(a) .32(a) .32(a) .64(a) .98(a) 1.60
Portfolio turnover rate(%)......... 39 72 41 39 77(d) 138 79
Average commission rate............ $ .0480 $ .0439 N/A N/A N/A N/A N/A
<CAPTION>
CLASS A
------------------------------------
1990 1989 1988
SELECTED PER SHARE DATA -------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 15.57 $ 13.21 $ 12.09
-------- -------- --------
Income (loss) from investment
operations
Net investment income........... .31 .44 .40
Net realized and unrealized gain
(loss) on investment
transactions................... (.90) 3.16 1.10
-------- -------- --------
Total from investment
operations................... (.59) 3.60 1.50
-------- -------- --------
Less distributions
From net investment income...... .33 .44 .38
In excess of net investment
income......................... -- -- --
From net realized gain.......... .23 .80 --
In excess of net realized
gain........................... -- -- --
From capital paid-in............ .01 -- --
-------- -------- --------
Total distributions............ .57 1.24 .38
-------- -------- --------
Net asset value, end of period..... $ 14.41 $ 15.57 $ 13.21
======== ======== ========
Total return(%).................... (3.76) 27.24 12.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $185,511 $197,789 $172,163
Ratio of expenses to average net
assets
With expense reimbursement(%)..... -- -- --
Without expense
reimbursement(%)................ 1.29 1.33 1.35
Ratio of net investment income to
average net assets(%)............. 2.10 2.70 2.80
Portfolio turnover rate(%)......... 67 86 84
Average commission rate............ N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------
1997 1996 1995
SELECTED PER SHARE DATA -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................................................... $ 17.69 $ 16.75 $ 13.91
-------- -------- --------
Income (loss) from investment operations
Net investment loss................................................................. (.14) (.13)(a) (.08)(a)
Net realized and unrealized gain (loss) on investment transactions.................. 1.96 2.81 3.71
-------- -------- --------
Total from investment operations................................................... 1.82 2.68 3.63
-------- -------- --------
Less distributions
From net investment income.......................................................... -- -- --
In excess of net investment income.................................................. .07 -- --
From net realized gain.............................................................. 1.72 1.74 .73
In excess of net realized gain...................................................... -- -- .06
-------- -------- --------
Total distributions................................................................ 1.79 1.74 .79
-------- -------- --------
Net asset value, end of period......................................................... $ 17.72 $ 17.69 $ 16.75
======== ======== ========
Total return(%)........................................................................ 10.69 16.02 26.13
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............................................... $ 4,433 $ 3,850 $ 2,669
Ratio of expenses to average net assets
With expense reimbursement(%)......................................................... -- 2.37 2.55
Without expense reimbursement(%)...................................................... 2.30 2.37 2.56
Ratio of net investment loss to average net assets(%).................................. (.79) (.79)(a) (.64)(a)
Portfolio turnover rate(%)............................................................. 39 72 41
Average commission rate................................................................ $ .0480 $ .0439 N/A
<CAPTION>
CLASS B CLASS C
---------------------- ----------------------
1994 1993(B) 1997 1996(C)
SELECTED PER SHARE DATA -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................................... $ 15.14 $ 16.42 $ 17.59 $ 18.46
-------- -------- -------- --------
Income (loss) from investment operations
Net investment loss.................................................. (.04)(a) --(a) (.07) (.06)(a)
Net realized and unrealized gain (loss) on investment transactions... (.54) .37 1.86 1.02
-------- -------- -------- --------
Total from investment operations.................................... (.58) .37 1.79 .96
-------- -------- -------- --------
Less distributions
From net investment income........................................... -- .07 -- --
In excess of net investment income................................... -- -- .13 .09
From net realized gain............................................... .52 1.58 1.78 1.74
In excess of net realized gain....................................... .13 -- -- --
-------- -------- -------- --------
Total distributions................................................. .65 1.65 1.91 1.83
-------- -------- -------- --------
Net asset value, end of period.......................................... $ 13.91 $ 15.14 $ 17.47 $ 17.59
======== ======== ======== ========
Total return(%)......................................................... (3.90) 2.34 10.58 5.20
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $ 1,399 $ 65 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement(%).......................................... 2.34 2.31 -- 2.44
Without expense reimbursement(%)....................................... 2.45 2.44 2.33 2.44
Ratio of net investment loss to average net assets(%)................... (.64)(a) (.33)(a) (.82) (.86)(a)
Portfolio turnover rate(%).............................................. 39 77(d) 39 72
Average commission rate................................................. N/A N/A $ .0480 $ .0439
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) From October 23, 1993 (commencement of operations) to
December 31, 1993.
(c) From April 30, 1996 (commencement of operations) to December
31, 1996.
(d) The portfolio turnover rate excludes sales of portfolio
securities made following the February 1, 1993
reorganization between the Fund and American Investors
Growth Fund, Inc. to realign the Fund's portfolio and
reflects an adjustment to the monthly average value of the
portfolio securities owned by the Fund during the year ended
December 31, 1993.
</TABLE>
6
<PAGE> 7
IVY GROWTH WITH INCOME FUND(A)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74 $ 7.79
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment income............. .08 .08 .11 .17 .08 .07 .09(e)
Net realized and unrealized gain
(loss) on investment
transactions..................... 2.37 2.16 2.13 (.36) 1.30 .18 2.72
------- ------- ------- ------- ------- ------- -------
Total from investment
operations...................... 2.45 2.24 2.24 (.19) 1.38 .25 2.81
------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income........ .03 .08 .08 .17 .06 .07 .09
In excess of net investment
income........................... -- .03 -- .01 -- -- --
From net realized gain............ 1.21 1.73 .26 .25 .83 .71 .77
------- ------- ------- ------- ------- ------- -------
Total distributions.............. 1.24 1.84 .34 .43 .89 .78 .86
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period..... $ 12.59 $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74
======= ======= ======= ======= ======= ======= =======
Total return(%).................... 21.57 20.46 24.93 (2.03) 15.07 2.61 36.33
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $69,742 $63,219 $59,054 $26,017 $22,669 $19,045 $17,093
Ratio of expenses to average net
assets(%)......................... 1.59 1.81 1.96 1.84 2.14 1.94 1.50(c)
Ratio of net investment income to
average net assets(%)............. .58 .68 1.06 1.83 .88 .73 1.10(e)
Portfolio turnover rate(%)......... 36 138 81 36 85 163 113
Average commission rate............ $ .0800 $ .0580 N/A N/A N/A N/A N/A
<CAPTION>
CLASS A
----------------------------------
1990 1989 1988
SELECTED PER SHARE DATA ------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 8.13 $10.32 $ 9.05
------- ------- --------
Income (loss) from investment
operations
Net investment income............. .16 .45 .55
Net realized and unrealized gain
(loss) on investment
transactions..................... (.18) 1.42 1.44
------- ------- --------
Total from investment
operations...................... (.02) 1.87 1.99
------- ------- --------
Less distributions
From net investment income........ .18 1.08 .55
In excess of net investment
income........................... -- -- --
From net realized gain............ .14 2.98 .17
------- ------- --------
Total distributions.............. .32 4.06 .72
------- ------- --------
Net asset value, end of period..... $ 7.79 $ 8.13 $ 10.32
======= ======= ========
Total return(%).................... (.18) 18.06 21.96
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $ 9,989 $21,258 $109,507
Ratio of expenses to average net
assets(%)......................... 1.48 1.36 1.26
Ratio of net investment income to
average net assets(%)............. 1.70 4.00 4.80
Portfolio turnover rate(%)......... 68 73 58
Average commission rate............ N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
1997 1996 1995 1994 1993(B)
SELECTED PER SHARE DATA ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 11.36 $ 10.98 $ 9.08 $ 9.70 $10.43
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment income (loss)................. (.02) (.01) .03 .09 --
Net realized and unrealized gain (loss) on
investment transactions..................... 2.37 2.15 2.13 (.36) .05
------- ------- ------ ------ ------
Total from investment operations............ 2.35 2.14 2.16 (.27) .05
------- ------- ------ ------ ------
Less distributions
From net investment income................... .03 -- .01 .09 .01
In excess of net investment income........... -- .08 -- .01 --
From net realized gain....................... 1.14 1.68 .25 .25 .77
------- ------- ------ ------ ------
Total distributions......................... 1.17 1.76 .26 .35 .78
------- ------- ------ ------ ------
Net asset value, end of period................ $ 12.54 $ 11.36 $10.98 $ 9.08 $ 9.70
======= ======= ====== ====== ======
Total return(%)............................... 20.74 19.59 23.94 (2.88) .61
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...... $20,071 $13,473 $8,868 $5,849 $ 888
Ratio of expenses to average net assets(%).... 2.31 2.55 2.75 2.70 3.09
Ratio of net investment income (loss) to
average net assets(%)........................ (.13) (.06) .27 .97 (.07)
Portfolio turnover rate(%).................... 36 138 81 36 85
Average commission rate....................... $ .0800 $ .0580 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------
1997 1996(D)
SELECTED PER SHARE DATA ------ -------
<S> <C> <C>
Net asset value, beginning of period.......... $11.37 $11.73
------ ------
Income from investment operations
Net investment loss.......................... (.01) (.08)
Net realized and unrealized gain on
investment transactions..................... 2.35 1.53
------ ------
Total from investment operations............ 2.34 1.45
------ ------
Less distributions
In excess of net investment income........... -- .08
From net realized gain....................... 1.27 1.73
------ ------
Total distributions......................... 1.27 1.81
------ ------
Net asset value, end of period................ $12.44 $11.37
====== ======
Total return(%)............................... 20.70 12.37
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...... $4,356 $ 28
Ratio of expenses to average net assets(%).... 2.23 3.02
Ratio of net investment loss to average net
assets(%).................................... (.05) (.53)
Portfolio turnover rate(%).................... 36 138
Average commission rate....................... $.0800 $.0580
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) These figures are adjusted to reflect a ten-for-one stock
split on June 30, 1989. Grantham, Mayo, Van Otterloo & Co.
was subadviser to Ivy Growth with Income Fund from 4/1/84
through 6/30/89. Ivy Growth with Income Fund was formerly
known as Ivy Institutional Investors Fund.
(b) From October 23, 1993 (commencement of operations) to
December 31, 1993.
(c) The ratio of expenses to average net assets is net of the
expenses reimbursed by IMI. Without reimbursement, the ratio
of expenses to average net assets would have been 1.61%.
(d) From April 30, 1996 (commencement of operations) to December
31, 1996.
(e) Net investment income is net of expenses reimbursed by IMI.
</TABLE>
7
<PAGE> 8
IVY US EMERGING GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
1997 1996 1995 1994 1993(A)
SELECTED PER SHARE DATA ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 26.54 $ 24.12 $ 18.38 $ 17.93 $ 10.00
------- ------- ------- ------- -------
Income from investment operations
Net investment loss......................... (.41)(f) (.35) (.24) (.24)(d) (.07)(d)
Net realized and unrealized gain on
investment transactions.................... 1.54(f) 4.84 7.90 .82 8.29
------- ------- ------- ------- -------
Total from investment operations........... 1.13 4.49 7.66 .58 8.22
------- ------- ------- ------- -------
Less distributions
From net realized gain...................... -- 2.07 1.92 -- .29
From capital paid-in........................ -- -- -- .13 --
------- ------- ------- ------- -------
Total distributions........................ -- 2.07 1.92 .13 .29
------- ------- ------- ------- -------
Net asset value, end of period................. $ 27.67 $ 26.54 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ======= =======
Total return(%)................................ 4.26 18.52 42.07 3.29 45.33(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $64,910 $55,944 $39,456 $21,493 $14,212
Ratio of expenses to average net assets
With expense reimbursement(%)................. -- -- -- 2.20 1.93
Without expense reimbursement(%).............. 1.67 1.76 1.95 2.22 2.33
Ratio of net investment loss to average net
assets(%)..................................... (1.37) (1.31) (1.39) (1.72)(d) (1.30)(d)
Portfolio turnover rate(%)..................... 65 68 86 67 41
Average commission rate........................ $ .0710 $ .0601 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------
1997 1996 1995 1994 1993(B)
SELECTED PER SHARE DATA ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 26.33 $ 24.12 $ 18.38 $17.93 $ 18.21
------- ------- ------- ------ -------
Income (loss) from investment operations
Net investment loss......................... (.33)(f) (.40) (.35) (.29)(d) (.04)(d)
Net realized and unrealized gain on
investment transactions.................... 1.26(f) 4.68 7.85 .74 .03
------- ------- ------- ------ -------
Total from investment operations........... .93 4.28 7.50 .45 (.01)
------- ------- ------- ------ -------
Less distributions
From net realized gain...................... -- 2.07 1.76 -- .27
------- ------- ------- ------ -------
Total distributions........................ -- 2.07 1.76 -- .27
------- ------- ------- ------ -------
Net asset value, end of period................. $ 27.26 $ 26.33 $ 24.12 $18.38 $ 17.93
======= ======= ======= ====== =======
Total return(%)................................ 3.53 17.65 41.03 2.51 (.05)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $47,789 $35,321 $13,985 $5,015 $ 1,216
Ratio of expenses to average net assets
With expense reimbursement(%)................. -- -- -- 2.95 2.68
Without expense reimbursement(%).............. 2.43 2.52 2.70 2.97 3.08
Ratio of net investment loss to average net
assets(%)..................................... (2.13) (2.07) (2.14) (2.47)(d) (2.05)(d)
Portfolio turnover rate(%)..................... 65 68 86 67 41
Average commission rate........................ $ .0710 $ .0601 N/A N/A N/A
<CAPTION>
CLASS C
----------------------
1997 1996(C)
SELECTED PER SHARE DATA ------- -------
<S> <C> <C>
Net asset value, beginning of period........... $26.29 $29.69
------ ------
Income (loss) from investment operations
Net investment loss......................... (.34)(f) (.14)
Net realized and unrealized gain on
investment transactions.................... 1.28(f) (1.19)
------ ------
Total from investment operations........... .94 (1.33)
------ ------
Less distributions
From net realized gain...................... -- 2.07
------ ------
Total distributions........................ -- 2.07
------ ------
Net asset value, end of period................. $27.23 $26.29
====== ======
Total return(%)................................ 3.58 (4.48)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $9,484 $4,018
Ratio of expenses to average net assets
With expense reimbursement(%)................. -- --
Without expense reimbursement(%).............. 2.39 2.52
Ratio of net investment loss to average net
assets(%)..................................... (2.09) (2.07)
Portfolio turnover rate(%)..................... 65 68
Average commission rate........................ $.0710 $.0601
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) From March 3, 1993 (commencement of operations) to December
31, 1993.
(b) From October 23, 1993 (commencement of operations) to
December 31, 1993.
(c) From April 30, 1996 (commencement of operations) to December
31, 1996.
(d) Net investment loss is net of expenses reimbursed by
manager.
(e) Total return represents aggregate total return since April
30, 1993 (when the Fund became available for sale to the
public) and does not reflect a sales charge.
(f) Based on average shares outstanding.
</TABLE>
8
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
Each Fund has its own investment objective and policies, which are described
below. Each Fund's investment objective is fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for a Fund's investment objective and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental, and may be
changed by the Board of Trustees of the Trust ("Trustees") without shareholder
approval. There can be no assurance that a Fund's objective will be met. The
different types of securities and investment techniques used by the Funds
involve varying degrees of risk. For information about the particular risks
associated with each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction of a Fund described
in this Prospectus or in the SAI states a maximum percentage of assets that may
be invested in a security or other asset, or describes a policy regarding
quality standards, that percentage limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes place. Thus,
for example, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage that results from circumstances
not involving any affirmative action by the Fund will not be considered a
violation.
IVY BOND FUND: Ivy Bond Fund seeks a high level of current income by
investing primarily in (i) investment grade corporate bonds (those rated Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB
by Standard & Poor's Corporation ("S&P"), or, if unrated, are considered by IMI
to be of comparable quality) and (ii) U.S. Government securities (including
mortgage-backed securities issued by U.S. Government agencies or
instrumentalities) that mature in more than 13 months. As a fundamental policy,
the Fund normally invests at least 65% of its total assets in these fixed income
securities. For temporary defensive purposes, the Fund may invest without limit
in U.S. Government securities maturing in 13 months or less, certificates of
deposit, bankers' acceptances, commercial paper and repurchase agreements. The
Fund may also invest up to 35% of its total assets in such money market
securities in order to meet redemptions or to maximize income to the Fund while
it is arranging longer-term investments.
The Fund may invest up to 35% of its net assets in corporate debt
securities, including zero coupon bonds (subject to the restrictions set forth
below), rated Ba or below by Moody's or BB or below by S&P, or, if unrated, are
considered by IMI to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds). The Fund will not invest in debt securities rated less
than C by either Moody's or S&P. During the twelve months ended December 31,
1997, based upon the dollar-weighted average ratings of the Fund's portfolio
holdings at the end of each month during that period, the Fund had the following
percentages of its total assets invested in debt securities rated in the
categories indicated (all ratings are by either Moody's or S&P, whichever rating
is higher): 4.5% in securities rated Aaa/AAA; 0% in securities rated Aa/AA; 7.8%
in securities rated A/A; 50.0% in securities rated Baa/BBB; 14.4% in securities
rated Ba/BB; 15.9% in securities rated B/B; and 1.3% in securities rated Caa/CCC
or below. The asset composition of the Fund subsequent to the period indicated
may or may not approximate these figures. See Appendix A in the SAI for a
description of Moody's and S&P's corporate bond ratings.
The Fund may invest up to 5% of its net assets in dividend-paying common and
preferred stocks (including adjustable rate preferred stocks and securities
convertible into common stocks), municipal bonds, zero coupon bonds, and
securities sold on a "when-issued" or firm commitment basis. As a temporary
measure for extraordinary or emergency purposes, the Fund may borrow from banks
up to 10% of the value of its total assets.
The Fund may invest up to 20% of its net assets in debt securities of
foreign issuers, including non-U.S. dollar-denominated debt securities, American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares ("GDSs"), Eurodollar
securities and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities thereof. The Fund may
also enter into forward foreign currency contracts, but not for speculative
purposes. The Fund may not invest more than 15% of the value of its net assets
in illiquid securities.
The Fund may purchase put and call options, provided the premium paid for
such options does not exceed 10% of the Fund's net assets. The Fund may also
sell covered put options with respect to up to 50% of the value of its net
assets, and may write covered call options so long as not more than 20% of the
Fund's net assets is subject to being purchased upon the exercise of the calls.
For hedging purposes only, the Fund may engage in transactions in interest rate
futures contracts, currency futures contracts and options on interest rate
futures and currency futures contracts.
IVY GROWTH FUND, IVY GROWTH WITH INCOME FUND, AND IVY US EMERGING GROWTH
FUND: Each Fund's principal investment objective is long-term capital growth
primarily through investment in equity securities, with current income being a
secondary consideration. Ivy Growth with Income Fund has tended to emphasize
dividend-paying stocks more than the other two Funds. Under normal conditions,
each Fund invests at least 65% of its total assets in common stocks and
securities convertible into common stocks. Ivy Growth Fund and Ivy Growth with
Income Fund invest primarily in common stocks of domestic corporations with low
price-earnings ratios and rising earnings, focusing on established, financially
secure firms with capitalizations over $100 million and more than three years of
operating history. Ivy US Emerging Growth Fund invests primarily in common
stocks (or securities with similar characteristics) of small- and medium-sized
companies, both domestic and foreign, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
All of the Funds may invest up to 25% of their net assets in foreign equity
securities, primarily those traded in European, Pacific Basin and Latin American
markets, some of which may be emerging markets involving special risks, as
described below. Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength.
When circumstances warrant, each Fund may invest without limit in investment
grade debt securities (e.g., U.S. Government securities or other corporate debt
securities rated at least Baa by Moody's or BBB by S&P, or, if unrated, are
considered by IMI to be of comparable quality), preferred stocks, or cash or
cash equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements.
Ivy Growth with Income Fund may invest less than 35% of its net assets in
debt securities rated Ba or below by Moody's or BB or below by S&P, or if
unrated, are considered by IMI to be of comparable quality (commonly referred to
as "high yield" or "junk" bonds). Ivy Growth Fund may invest up to 5% of its net
assets in these low-rated debt securities. Neither Fund will invest in debt
securities rated less than C by either Moody's or S&P. (As of December 31, 1997,
neither Fund invested in low-rated debt securities).
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As a fundamental policy, each Fund may borrow up to 10% of the value of its
total assets, but only for temporary purposes when it would be advantageous to
do so from an investment standpoint. All of the Funds may invest up to 5% of
their net assets in warrants. Each Fund may not invest more than 15% of its net
assets in illiquid securities. All of the Funds may enter into forward foreign
currency contracts. Ivy Growth Fund and Ivy Growth with Income Fund may also
invest in equity real estate investment trusts.
Each of the Funds may write put options, with respect to not more than 10%
of the value of its net assets, on securities and stock indices, and may write
covered call options with respect to not more than 25% of the value of its net
assets. Each Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its net assets. For hedging purposes
only, each Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. A Fund's equivalent exposure in stock
index futures contracts will not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
BANK OBLIGATIONS: The bank obligations in which the Funds may invest
include certificates of deposit, bankers' acceptances and other short-term debt
obligations. Investments in certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets in excess of $1 billion,
and (ii) other banks if the principal amount of the obligation is fully insured
by the Federal Deposit Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are limited to obligations of
Federal or state-chartered institutions whose total assets exceed $1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on a Fund's net asset value
of any increase or decrease in the value of the Fund's portfolio securities.
Money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations,
and finance companies. Each Fund's investments in commercial paper are limited
to obligations rated Prime-1 by Moody's or A-1 by S&P, or if not rated, issued
by companies having an outstanding debt issue currently rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible securities in which the Funds may
invest include corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible securities can be converted
into equity securities, their value will normally vary in some proportion with
those of the underlying equity security. Convertible securities usually provide
a higher yield than the underlying equity, so the price decline of a convertible
security may sometimes be less substantial than that of the underlying equity
security.
DEBT SECURITIES, IN GENERAL: Investment in debt securities, including
municipal securities, involves both interest rate and credit risk. Generally,
the value of debt instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt securities
generally increases. Conversely, rising interest rates tend to cause the value
of debt securities to decrease. Bonds with longer maturities generally are more
volatile than bonds with shorter maturities. The market value of debt securities
also varies according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the increased risk that
the issuer will be unable to meet its obligations on interest or principal
payments at the time called for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates,
which are mortgage-backed securities). When such securities are held to
maturity, the payment of principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible credit quality.
U.S. Government securities that are not held to maturity are subject to
variations in market value caused by fluctuations in interest rates.
Mortgage-backed securities are securities representing part ownership of a
pool of mortgage loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the loans typically
will be substantially less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the security. Conversely, rising interest rates tend to
decrease the rate of prepayment, thereby lengthening the security's actual
average life (and increasing the security's price volatility.) Since it is not
possible to predict accurately the average life of a particular pool, and
because prepayments are reinvested at current rates, mortgage-backed securities
may involve significantly greater price and yield volatility than traditional
debt securities.
INVESTMENT GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered "medium grade" obligations) generally have an
adequate capacity to pay interest and repay principal, but lack outstanding
investment characteristics and have some speculative characteristics.
LOW-RATED DEBT SECURITIES: Securities rated lower than Baa by Moody's or
BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), are considered to have predominately speculative
characteristics with respect to the issuer's capacity to pay interest and repay
principal. Investors in those Funds that invest in these securities should be
aware of and willing to accept the special risks associated with these
securities.
While high yield debt securities are likely to have some quality and
protective characteristics, these qualities are largely outweighed by the risk
of exposure to adverse conditions and other uncertainties. Accordingly,
investments in such securities, while generally providing for greater income and
potential opportunity for gain than investments in higher-rated securities, also
entail greater risk (including the possibility of default or bankruptcy of the
issuer of such securities) and generally involve greater price volatility than
securities in higher rating categories. IMI seeks to reduce risk through
diversification (including investments in foreign securities), credit analysis
and attention to current developments and trends in both the economy and
financial markets. Should the rating of a portfolio security be downgraded, IMI
will determine whether it is in the affected Fund's best interest to retain or
dispose of the security (unless the security is downgraded below the rating of
C, in which case IMI most likely would dispose of the security based on then
existing market conditions). For additional information regarding the risks
associated
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with investing in high yield bonds, see the SAI (in particular, Appendix A,
which contains a more complete description of the ratings assigned by Moody's
and S&P).
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: A Fund usually effects its currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. However, some price spread on currency exchange
(e.g., to cover service charges) is usually incurred when a Fund converts assets
from one currency to another. A Fund may also be affected unfavorably by
fluctuations in the relative rates of exchange between the currencies of
different nations or by political or economic developments in the U.S. or
abroad. For example, significant uncertainty surrounds the proposed introduction
of the euro (a common currency for the European Union) in January 1999 and its
effect on the value of securities denominated in local European currencies.
These and other currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the Funds.
FOREIGN SECURITIES: The foreign securities in which the Funds invest may
include non-U.S. dollar-denominated securities, Eurodollar securities, sponsored
or unsponsored ADRs, GDRs, ADSs and GDSs, and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions or
instrumentalities thereof). Investors should consider carefully the special
risks that arise in connection with investing in securities issued by companies
and governments of foreign nations, which are in addition to those risks that
are generally associated with the Funds' investments.
In many foreign countries there is less regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. For example, foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and foreign securities
transactions may be subject to higher brokerage costs. There also tends to be
less publicly available information about issuers in foreign countries, and
foreign securities markets of many of the countries in which the Funds may
invest may be smaller, less liquid and subject to greater price volatility than
those in the United States. Securities issued in emerging market countries,
including the developing countries of Latin America and Eastern Europe, may be
even less liquid and more volatile than securities of issuers operating in more
developed economies (e.g., countries in other parts of Europe). Generally, price
fluctuations in the Funds' foreign security holdings are likely to be high
relative to those of securities issued in the United States.
Other risks include the possibility of expropriation, nationalization or
confiscatory taxation, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), difficulties in
pricing, default in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social instability, or
other developments that could adversely affect the Funds' foreign investments.
In addition, investing in foreign securities usually involves the use of foreign
currencies. For a description of the risks associated with such currencies, see
the SAI.
The risks of investing in foreign securities (described above) are likely to
be intensified in the case of investments in issuers domiciled or doing
substantial business in countries with emerging or developing economies
("emerging markets"). For example, countries with emerging markets may have
relatively unstable governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of assets). Security
prices in emerging markets can also be significantly more volatile than in the
more developed nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Delayed settlements could cause a Fund to miss attractive investment
opportunities or impair its ability to dispose of portfolio securities,
resulting in a loss if the value of the securities subsequently declines. In
addition, many emerging markets have experienced and continue to experience
especially high rates of inflation. In certain countries, inflation has at times
accelerated rapidly to hyperinflationary levels, creating a negative interest
rate environment and sharply eroding the value of outstanding financial assets
in those countries.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. In order for these
emerging economies to continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is essential. Historically,
there is a strong direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI believes that
investment opportunities (particularly in the energy, environmental services,
natural resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which the Funds and their shareholders will benefit. IMI believes
that similar investment opportunities will be created for companies involved in
providing consumer goods and services (e.g., food, beverages, autos, housing,
tourism and leisure and merchandising).
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date
at a predetermined price. Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the hedged currencies, they also
tend to limit any potential gain that might result should the value of the
currencies increase. In addition, there may be an imperfect correlation between
a Fund's portfolio holdings of securities denominated in a particular currency
and forward contracts entered into by the Fund, which may prevent the Fund from
achieving the intended hedge or expose the Fund to the risk of currency exchange
loss.
OPTIONS AND FUTURES TRANSACTIONS: The Funds may use various techniques to
increase or decrease their exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other factors that affect the
value of the Funds' securities. These techniques may involve derivative
transactions such as purchasing put and call options, selling put and call
options, and engaging in transactions in foreign currency futures, stock index
futures and related options.
Each Fund may invest in options on securities in accordance with its stated
investment objective and policies. A put option is a short-term contract that
gives the purchaser of the option the right, in return for a premium, to sell
the underlying security or currency to the seller of the option at a specified
price during the term of the option. A call option is a short-term contract that
gives the purchaser the right, in return for a premium, to buy the underlying
security or currency from the seller of the option at a specified price during
the term of the option. An option on a stock index gives the purchaser the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option.
Each Fund may also enter into futures transactions in accordance with its
stated investment objective and policies. An interest rate futures contract is
an agreement between two parties to buy or sell a specified debt security at a
set price on a future date. A foreign currency futures contract is an agreement
to buy or sell a specified amount of a foreign currency for a set price on a
future
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date. A stock index futures contract is an agreement to take or make delivery of
an amount of cash based on the difference between the value of the index at the
beginning and at the end of the contract period.
Investors should be aware that the risks associated with the use of options
and futures are considerable. Options and futures transactions generally involve
a small investment of cash relative to the magnitude of the risk assumed, and
therefore could result in a significant loss to a Fund if IMI judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments. A Fund may also experience a significant loss if it is
unable to close a particular position due to the lack of a liquid secondary
market. For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
corporation, trust or association that invests in real estate mortgages or
equities for the benefit of its investors. REITs are dependent upon management
skill, may not be diversified and are subject to the risks of financing
projects. Equity REITs are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption under the Investment Company Act
of 1940, as amended (the "1940 Act"). By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and agreed-upon
yield. Each Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. A Fund could experience a delay in obtaining direct ownership
of the underlying collateral, and might incur a loss if the value of the
security should decline.
ILLIQUID SECURITIES: An "illiquid security" is an asset that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security on its books.
Illiquid securities may include securities that are subject to restrictions on
resale ("restricted securities") because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"). Illiquid securities often
offer the potential for higher returns than more readily marketable securities,
but carry the risk that the Fund may not be able to dispose of them at an
advantageous time or price. The Fund may have to bear the expense of registering
restricted securities for resale, and the risk of substantial delays in
effecting such registrations. In addition, issuers of restricted securities may
not be subject to the disclosure and other investor protection requirements that
would apply if their securities were publicly traded.
SMALL COMPANIES: Investing in smaller company stocks involves certain
special considerations and risks that are not usually associated with investing
in larger, more established companies. For example, the securities of small or
new companies may be subject to more abrupt or erratic market movements because
they tend to be thinly traded and are subject to a greater degree to changes in
the issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs associated with
trading in smaller company stocks may be higher than those of larger companies.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is organized as a separate, diversified portfolio of the Trust, an
open-end management investment company organized as a Massachusetts business
trust on December 21, 1983. The business and affairs of each Fund are managed
under the direction of the Trustees. Information about the Trustees, as well as
the Trust's executive officers, may be found in the SAI. The Trust has an
unlimited number of authorized shares of beneficial interest, and currently has
18 separate portfolios. Each Fund offers Class A, Class B, Class C and Advisor
Class (which is described in a separate prospectus). Ivy Bond Fund also offers
Class I shares. Shares of each Fund entitle their holders to one vote per share
(with proportionate voting for fractional shares). The shares of each class
represent an interest in the same portfolio of Fund investments. Each class of
shares, except for the Advisor Class and Class I, has a different Rule 12b-1
distribution plan and bears different distribution fees. Class I shares are
subject to lower administrative service and transfer agency fees than the Fund's
Class A, Class B, Class C and Advisor Class shares. Each class of shares also
has its own sales charge and expense structure that may affect its performance
relative to a Fund's other classes of shares. Shares of each class have equal
rights as to voting, redemption, dividends and liquidation but have exclusive
voting rights with respect to their Rule 12b-1 distribution plans.
The Trust employs IMI to provide business management and investment advisory
services, Mackenzie Investment Management Inc. ("MIMI") to provide
administrative and accounting services, Ivy Mackenzie Distributors, Inc.
("IMDI") to distribute the Funds' shares and Ivy Mackenzie Services Corp.
("IMSC") to provide transfer agent and shareholder-related services for the
Funds. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI. IMI has been an
investment advisor since 1992. As of March 31, 1998, IMI and MIMI had
approximately $3.9 billion and $1.3 billion, respectively, in assets under
management. MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"),
which has been an investment counsel and mutual fund manager in Toronto,
Ontario, Canada for more than 31 years.
INVESTMENT MANAGER
For IMI's business management services and investment advisory services,
each Fund pays a fee based on its average net assets at the percentage rates set
forth below.
Ivy Bond Fund pays a fee that is equal, on an annual basis to .75% of the
first $100 million in average net assets, reduced to .50% of average net assets
in excess of $100 million. For the year ended December 31, 1997, Ivy Bond Fund
paid IMI an investment management fee at an effective rate of .72% of the Fund's
average net assets.
Ivy US Emerging Growth Fund pays a fee that is equal, on an annual basis, to
.85% of its average net assets. IMI voluntarily limits Ivy US Emerging Growth
Fund's total operating expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation, indemnification, and extraordinary expenses)
to 1.95% of the Fund's average net assets. Fund expenses, for the year ended
December 31, 1997 were below this limit. This voluntary expense limitation may
be terminated or revised at any time.
Ivy Growth Fund pays a fee that is equal, on an annual basis, to .85% of its
average net assets. Ivy Growth with Income Fund pays a fee that is equal, on an
annual basis, to .75% of its average net assets.
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IMI pays all expenses that it incurs in rendering management services to the
Funds. Each Fund bears its own operational costs. General expenses of the Trust
that are not readily identifiable as belonging to a particular Fund (or a
particular class thereof) are allocated among and charged to each Fund based on
its relative net asset size. Expenses that are attributable to a particular Fund
(or class thereof) will be borne by that Fund (or class) directly. The
investment management fees paid by the Funds are higher than those charged by
many funds that invest primarily in U.S. securities, but not necessarily higher
than the fees charged to funds with investment objectives similar to those of
the Funds.
PORTFOLIO MANAGEMENT: The following individuals have responsibilities for
management of the Funds:
- James W. Broadfoot is President and Chief Investment Officer of IMI and
Vice President of the Trust, and has been a portfolio manager for Ivy US
Emerging Growth Fund since the Fund's inception in 1993, Ivy Growth Fund
since 1994 and Ivy Growth with Income Fund since 1997. Prior to joining
the organization in 1990, Mr. Broadfoot was the principal in an investment
counsel firm specializing in emerging growth companies. Mr. Broadfoot has
25 years of professional investment experience, and is a Chartered
Financial Analyst. He has an MBA from The Wharton School of the University
of Pennsylvania.
- Frank DuMond is a portfolio manager for Ivy Growth Fund and Ivy Growth
with Income Fund. Mr. DuMond has served as portfolio manager since 1997,
and prior to that served as a research analyst from 1994 through 1996. Mr.
DuMond joined the organization in 1994 and has four years of professional
investment experience. He is a Chartered Financial Analyst and holds a
Bachelor of Science degree from the Massachusetts Institute of Technology.
- Barbara Trebbi is a Senior Vice President of IMI, and has been a portfolio
manager for Ivy Growth Fund since 1993. Ms. Trebbi joined the organization
in 1988 and has 10 years of professional investment experience. She is a
Chartered Financial Analyst and holds a Graduate Diploma from the London
School of Economics.
- The Ivy Bond Fund is managed using a team approach. Michael Borowsky has
been a member of the team since 1994. During this period he has been
responsible for the selection of high yield bonds and emerging market
debt. Prior to joining Ivy Mackenzie, Mr. Borowsky was a fixed income
specialist at Lehwald, Orosey and Pepe. He holds a Bachelor of Science
degree in finance and economics from Drexel University.
Brian Barrett joined the Ivy Bond Fund team in 1997 after having worked with
the team on a number of global analysis projects. He has broad fixed income
quantative experience. This includes working with Mellon Bond Associates as Vice
President and Director of Research in 1987-1988. In this capacity he was a
member of the Mellon Bank Trust Investment Committee which oversaw $190 billion
of trust and custodial funds. Concurrent with his tenure at Ivy, Dr. Barrett is
an Associate Professor of Finance at the University of Miami (Florida). Dr.
Barrett is a Chartered Financial Analyst and holds a Ph.D in finance from the
Georgia Institute of Technology.
Michael G. Landry, Chairman and Director of Ivy Management, Inc., was
president of the Fund from 1987 to 1996. From 1997 to present, Mr. Landry is
Chairman of Ivy Bond Fund and is responsible for establishing the overall
investment strategy of the Fund. Prior to joining the firm, Mr. Landry was a
Senior Vice President and portfolio manager with Templeton International. He has
more than 25 years of professional investment experience. Mr. Landry has a
degree in economics from Carleton University.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Funds, such as
maintaining the registration of Fund shares under state "Blue Sky" laws, and
assisting with the preparation of Federal and state income tax returns,
financial statements and periodic reports to shareholders. MIMI also assists the
Trust's legal counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this arrangement, the
average net assets attributable to each Fund's Class A, Class B and Class C
shares are subject to a fee accrued daily and paid monthly at the annual rate of
0.10%. The net assets attributable to Class I shares are subject to a fee at the
annual rate of 0.01%.
MIMI also provides certain accounting and pricing services for the Funds
(see "Fund Accounting Services" in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Funds, and also
provides certain shareholder-related services. Certain broker-dealers that
maintain shareholder accounts with the Funds through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment Advisory and
Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an initial sales charge
unless the amount you purchase is $500,000 or more (see "Contingent Deferred
Sales Charge -- Class A Shares"). Certain purchases qualify for a reduced
initial sales charge (see "Qualifying for a Reduced Sales Charge"). Class A
shares are subject to ongoing service fees at an annual rate of 0.25% of a
Fund's average net assets attributable to its Class A shares (excluding Class A
shares of Ivy Growth Fund and Ivy Growth with Income Fund held in accounts
opened prior to January 1, 1992). If you do not specify on your Account
Application which class of shares you are purchasing, it will be assumed that
you are investing in Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C shares are not subject to
an initial sales charge, but are subject to a CDSC if redeemed within six years
of purchase, in the case of Class B shares, or within one year of purchase, in
the case of Class C shares. Both classes of shares are subject to ongoing
service and distribution fees at a combined annual rate of up to 1.00% of a
Fund's average net assets attributable to its Class B or Class C shares. The
ongoing distribution fee will cause these shares to have a higher expense ratio
than that of Class A and Class I shares.
CLASS I SHARES: Class I shares are offered by Ivy Bond Fund only to
institutions and certain individuals, and are not subject to an initial sales
charge or a CDSC, nor to ongoing service or distribution fees. Class I shares
also bear lower administrative services fees and transfer agency fees than Class
A, Class B and Class C shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE: The multi-class structure
of the Funds allows you to choose the most beneficial way to buy shares given
the size of your purchase and the length of time you expect to hold your shares.
You should consider whether, during the anticipated life of your Fund
investment, the accumulated service and distribution fees on Class B and Class C
shares would be less than the initial sales charge and accumulated service fees
on Class A shares purchased at the same time, and to what extent
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this differential would be offset by the Class A shares' potentially higher
yield. Also, sales personnel may receive different compensation depending on
which class of shares they are selling. The tables under the caption "Annual
Fund Operating Expenses" at the beginning of this Prospectus contain additional
information that is designed to assist you in making this determination.
DIVIDENDS AND TAXES
Distributions you receive from a Fund are reinvested in additional shares of
the same class of a Fund unless you elect to receive them in cash. Dividends
ordinarily will vary from one class to another.
Ivy Growth with Income Fund intends normally to declare a daily dividend,
and pay accumulated dividends quarterly. If a shareholder of the Fund redeems
all of his/her shares at any time prior to payment of a distribution, all
declarations accrued to the date of redemption are paid in addition to the
redemption proceeds. Ivy US Emerging Growth Fund and Ivy Growth Fund will
distribute net investment income and net realized capital gains, if any, at
least once a year. In order to provide steady cash flow to shareholders, Ivy
Bond Fund intends to declare and pay dividends monthly. The Fund will distribute
net realized capital gains, if any, at least once a year. A Fund may make an
additional distribution of net investment income and net realized capital gains
to comply with the calendar year distribution requirement under the excise tax
provisions of Section 4982 of the Code.
TAXATION: The following discussion is intended for general information
only. You should consult with your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status of distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as a regulated investment company
under the Code. To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any Federal income or excise tax.
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of a Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, are taxable to individual shareholders at a maximum 20%
or 28% capital gains rate, regardless of how long the shareholder has held the
Fund's shares. Dividends are taxable to shareholders in the same manner whether
received in cash or reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in securities that are issued at a discount will result each
year in income to a Fund equal to a portion of the excess of the face value of
the securities over their issue price, even though the Fund receives no cash
interest payments from the securities.
Income and gains received by a Fund from sources within foreign countries
may be subject to foreign withholding and other taxes. Unless a Fund is eligible
to and elects to "pass through" to its shareholders the amount of foreign income
and similar taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of investment company
taxable income received from the Fund will be treated as U.S. source income.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which may be
eligible for reduced Federal tax rates, generally depending upon the
shareholder's holding period for the shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service
("IRS") that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies, authorities and instrumentalities
may be exempt from state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield") is computed
separately for each class of Fund shares in accordance with formulas prescribed
by the SEC. Performance information for each class may be compared in reports
and promotional literature to indices such as the Standard and Poor's 500 Stock
Index, Dow Jones Industrial Average, and Morgan Stanley Capital International
World Index. Advertisements, sales literature and communications to shareholders
may also contain statements of a Fund's current yield, various expressions of
total return and current distribution rate. Performance figures will vary in
part because of the different expense structures of the Funds' different
classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in a Fund for a
specified period, and assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge. "Average annual total return"
represents the average annual compound rate of return of an investment in a
particular class of Fund shares assuming the investment is held for one year,
five years and ten years as of the end of the most recent calendar quarter.
Where a Fund provides total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value, "total return"
is based on the total of all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the original
investment expressed as a percentage of the purchase price.
"Current yield" reflects the income per share earned by a Fund's portfolio
investments, and is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and then annualizing the result. Dividends or
distributions that were paid to a Fund's shareholders are reflected in the
"current distribution rate," which is computed by dividing the total amount of
dividends per share paid by a Fund during the preceding 12 months by the Fund's
current maximum offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield" computation
because it may include distributions to shareholders from sources
14
<PAGE> 15
other than dividends and interest, short term capital gain and net equalization
credits and will be calculated over a different period of time.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account Application on the last
page of this Prospectus. Make your check payable to the Fund in which you are
investing. No third party checks will be accepted. Deliver these items to your
registered representative or selling broker, or send them to one of the
addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Funds reserve the right to reject any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment is $1,000; the
minimum additional investment is $100. Initial or additional amounts for
retirement accounts may be less (see "Retirement Plans").
Accounts in Class I of Ivy Bond Fund can be opened with a minimum initial
investment of $250,000; the minimum additional investment is $10,000. The
minimum initial investment in Class I of Ivy Bond Fund may be spread over the
thirteen-month period following the opening of the account.
BUYING ADDITIONAL SHARES: You may add to your account at any time through
any of the following options:
By Mail: Complete the investment slip attached to your statement, or write
instructions including the account registration, fund number, and account number
of the shares you wish to purchase. Send your check (payable to the Fund in
which you are investing) and investment slip or written instructions to one of
the addresses above.
Through your Broker: Deliver to your registered representative or selling
broker the investment slip attached to your statement, or written instructions,
along with your payment.
By Wire: Purchases may also be made by wiring money from your bank account
to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as
follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
By Automatic Investment Method: Complete Sections 6A and 7B on the Account
Application (See "Automatic Investment Method" on page 21 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of a Fund is the net asset value
("NAV") per share plus a sales charge, which may be reduced or eliminated in
certain circumstances. The purchase price per share is known as the public
offering price. Your purchase price for Class B and Class C shares (and Class I
shares in the case of Ivy Bond Fund) is the net asset value per share.
Share purchases will be made at the next determined price after your
purchase order is received. The price is effective for orders received by IMSC
or by your registered securities dealer prior to the time of the determination
of the NAV. Any orders received after the time of the determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer before the NAV is determined and that
are transmitted through the facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's price. Any loss
resulting from the dealer's failure to submit an order by the deadline will be
borne by that dealer.
You will receive an account statement after any purchase, exchange or full
liquidation. Statements related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further explanation) and/or
systematic withdrawal plans will be sent quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is determined for each
Class of shares as of the close of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open by dividing the value of a Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding, adjusted to the nearest cent. These procedures are described more
completely in the SAI.
The Trustees have established procedures to value a Fund's securities in
order to determine the NAV. Securities and other assets for which market prices
are not readily available are valued at fair value, as determined by IMI and
approved by the Trustees. Money market instruments of a Fund are valued at
amortized cost.
Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange. Trading
on these foreign exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on which there is no
regular trading on the Exchange. If events materially affecting the value of the
Fund's portfolio securities occur between the time when these foreign exchanges
close and the time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and approved by the
Trustees.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price equal to their NAV per share
plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
-------------------------------- PORTION OF
AS A PUBLIC
PERCENTAGE OF AS A PERCENTAGE OFFERING PRICE
IVY BOND FUND PUBLIC OF NET AMOUNT RETAINED BY
AMOUNT INVESTED OFFERING PRICE INVESTED DEALER
--------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000....................... 4.75% 4.99% 4.00%
$100,000 but less than $250,000.......... 3.75% 3.90% 3.00%
$250,000 but less than $500,000.......... 2.50% 2.56% 2.00%
$500,000 or over*........................ 0.00% 0.00% 0.00%
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
SALES CHARGE
-------------------------------- PORTION OF
IVY GROWTH FUND AS A PUBLIC
IVY GROWTH WITH INCOME FUND PERCENTAGE OF AS A PERCENTAGE OFFERING PRICE
IVY US EMERGING GROWTH FUND PUBLIC OF NET AMOUNT RETAINED BY
AMOUNT INVESTED OFFERING PRICE INVESTED DEALER
--------------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000........................ 5.75% 6.10% 5.00%
$50,000 but less than $100,000........... 5.25% 5.54% 4.50%
$100,000 but less than $250,000.......... 4.50% 4.71% 3.75%
$250,000 but less than $500,000.......... 3.00% 3.09% 2.50%
$500,000 or over*........................ 0.00% 0.00% 0.00%
</TABLE>
* A CDSC may apply to the redemption of Class A shares that are purchased
without an initial sales charge. See "Contingent Deferred Sales Charge --
Class A Shares."
Sales charges are not applied to any dividends or capital gains that are
reinvested in additional shares of the Fund. An investor may be charged a
transaction fee for Class A and Class I shares (in the case of Ivy Bond Fund)
purchased or redeemed at NAV through a broker or agent other than IMDI.
With respect to purchases of $500,000 or more through dealers or agents,
IMDI may, at the time of purchase, pay such dealers or agents from its own
resources a commission to compensate such dealers or agents for their
distribution assistance in connection with such purchases. The commission would
be computed as set forth below:
NAV COMMISSION TABLE
<TABLE>
<CAPTION>
PURCHASE AMOUNT COMMISSION
--------------- ----------
<S> <C> <C>
First $3,000,000.................................................. 1.00%
Next $2,000,000.................................................. .50%
Over $5,000,000.................................................. .25%
</TABLE>
Dealers who receive 90% or more of the sales charge may be deemed to be
"underwriters" as that term is defined in the 1933 Act.
IMDI compensates participating brokers who sell Class A shares through the
initial sales charge. IMDI retains that portion of the initial sales charge that
is not reallowed to the dealers, which it may use to distribute a Fund's Class A
shares. Pursuant to a separate distribution plan for the Funds' Class A, Class B
and Class C shares, IMDI bears various promotional and sales related expenses,
including the cost of printing and mailing prospectuses to persons other than
shareholders. Pursuant to the Funds' Class A distribution plans, IMDI currently
pays a continuing service fee to qualified dealers at an annual rate of 0.25% of
qualified investments.
IMDI may from time to time pay a bonus or other incentive to dealers (other
than IMDI) which employ a registered representative who sells a minimum dollar
amount of the shares of a Fund and/or other funds distributed by IMDI during a
specified period of time. This bonus or other incentive may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or without the U.S. or other bonuses such as gift
certificates or the cash equivalent of such bonus or incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares will be made at NAV with no
initial sales charge, but if the shares are redeemed within 24 months after the
end of the calendar month in which the purchase was made (the CDSC period), a
CDSC of 1.00% will be imposed.
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends or capital gains which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account not subject to the CDSC. The CDSC is waived in
certain circumstances. See the discussion below under the caption "Waiver of
Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is waived for: (i)
redemptions in connection with distributions not exceeding 12% annually of the
initial account balance (i.e., the value of the shareholder's Class A Fund
account at the time of the initial distribution) (ia) following retirement under
a tax qualified retirement plan, or (ib) upon attaining age 59 1/2 in the case
of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or a
Keogh Plan; (ii) redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or complete redemption following
the death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is named, provided
that the redemption is requested within one year of death or disability. IMDI
may require documentation prior to waiver of the CDSC.
Class A shareholders may exchange their Class A shares subject to a CDSC
("outstanding Class A shares") for Class A shares of another Ivy fund ("new
Class A shares") on the basis of the relative NAV per Class A share, without the
payment of any CDSC that would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have been charged if the
outstanding Class A shares were redeemed will carry over to the new Class A
shares received in the exchange, and will be charged accordingly at the time of
redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of Accumulation ("ROA") is calculated
by determining the current market value of all Class A shares in all Ivy fund
accounts (except Ivy Money Market Fund) owned by you, your spouse, and your
children under 21 years of age. ROA is also applicable to accounts under a
trustee or other single fiduciary (including retirement accounts qualified under
Section 401 of the Code). The current market values of your accounts as
described above is added together and then added to your current purchase
amount. If the combined total is equal to or greater than a breakpoint amount
for the Fund you are purchasing, then you qualify for the reduced sales charge
on that purchase. To reduce or eliminate the sales charge, you must complete
Section 4C of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent ("LOI") is a non-binding
agreement that states your intention to invest in additional Class A shares,
within a thirteen month period after the initial purchase, an amount equal to a
breakpoint amount for a Fund. The LOI may be backdated up to 90 days. To sign an
LOI, please complete Section 4C of the Account Application.
Should the LOI not be fulfilled within the thirteen month period, your
account will be debited for the difference between the full sales charge that
applies for the amount actually invested and the reduced sales charge actually
paid on purchases placed under the terms of the LOI.
16
<PAGE> 17
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE: Investors who held Ivy Fund
shares as of December 31, 1991, or who held shares of certain funds that were
reorganized into an Ivy fund, may be exempt from sales charges on the purchase
of Class A shares of any of the Ivy funds. If you believe you may be eligible
for such an exemption, please contact IMSC at 1-800-235-3322 for additional
information.
Class A shares of a Fund may be purchased without an initial sales charge or
CDSC by (i) officers and Trustees of the Trust (and their relatives), (ii)
officers, directors, employees, retired employees, legal counsel and accountants
of IMI, MIMI, and MFC (and their relatives), and (iii) directors, officers,
partners, registered representatives, employees and retired employees (and their
relatives) of dealers having a sales agreement with IMDI (or trustees or
custodians of any qualified retirement plan or IRA established for the benefit
of any such person). In addition, certain investment advisors and financial
planners who charge a management, consulting or other fee for their services and
who place trades for their own accounts or the accounts of their clients may
purchase Class A shares of a Fund without an initial sales charge or a CDSC,
provided such purchases are placed through a broker or agent who maintains an
omnibus account with that Fund. Also, clients of these advisors and planners may
make purchases under the same conditions if the purchases are through the master
account of such advisor or planner on the books of such broker or agent. This
provision applies to assets of retirement and deferred compensation plans and
trusts used to fund those plans including, but not limited to, those defined in
Section 401(a), 403(b) or 457 of the Code and "Rabbi Trusts" whose assets are
used to purchase shares of a Fund through the aforementioned channels.
Class A shares of a Fund may be purchased at NAV by retirement plans
qualified under section 401(a) or 403(b) of the Code or subject to the Employee
Retirement Income Security Act of 1974, as amended. A CDSC of 1.00% will be
imposed on such purchases in the event of certain plan-level redemption
transactions within 24 months following such purchases. Class A shares of a Fund
are made available to Merrill Lynch Daily K Plan (the "Plan") participants at
NAV without an initial sales charge if the Plan has at least $3 million in
assets or 500 or more eligible employees. Class B shares of a Fund are made
available to Plan participants at NAV without a CDSC if the Plan has less than
$3 million in assets or fewer than 500 eligible employees. For further
information see "GROUP SYSTEMATIC INVESTMENT PROGRAM" in the Fund's SAI.
If investments by retirement plans at NAV are made through a dealer who has
executed a dealer agreement with respect to a Fund, IMDI may, at the time of
purchase, pay the dealer out of IMDI's own resources a commission to compensate
the dealer for its distribution assistance in connection with the retirement
plan's investment. Refer to the NAV Commission Table on page 16 of this
Prospectus. A CDSC of 1.00% will be imposed on such purchases in the event of
certain redemption transactions within 24 months following such purchases.
Please contact IMDI for additional information.
Class A shares can also be purchased without an initial sales charge, but
subject to a CDSC of 1.00% during the first 24 months, by: (a) any state, county
or city (or any instrumentality, department, authority or agency of such
entities) that is prohibited by applicable investment laws from paying a sales
charge or commission when purchasing shares of a registered investment
management company (an "eligible governmental authority"), and (b) trust
companies, bank trust departments, credit unions, savings and loans and other
similar organizations in their fiduciary capacity or for their own accounts,
subject to any minimum requirements set by IMDI (currently, these criteria
require that the amount invested or to be invested in the subsequent 13-month
period totals at least $250,000). In either case, IMDI may pay commissions to
dealers that provide distribution assistance on the same basis as in the
preceding paragraph.
Class A shares of a Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies. Additional
information on reductions or waivers may be obtained from IMDI at the address
listed on the cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B AND CLASS C SHARES
Class B and Class C shares are offered at NAV per share without a front end
sales charge. Class C shares redeemed within one year of purchase will be
subject to a CDSC of 1%, and Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates set forth below. This charge
will be assessed on an amount equal to the lesser of the current market value or
the original purchase cost of the shares being redeemed. Accordingly, you will
not be assessed a CDSC on increases in account value above the initial purchase
price, including shares derived from dividends or capital gains reinvested. In
determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the requisite maximum holding period or those you acquire through
reinvestment of dividends or capital gain, and next from the shares you have
held the longest during the requisite holding period.
Proceeds from the CDSC are paid to IMDI. The proceeds are used, in whole or
in part, to defray its expenses related to providing each Fund with distribution
services in connection with the sale of Class B and Class C shares, such as
compensating selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees makes it possible
for a Fund to sell Class B or Class C shares without deducting a sales charge at
the time of the purchase.
In the case of Class B shares, the amount of the CDSC, if any, will vary
depending on the number of months from the time you purchase your shares until
the time you redeem them. Solely for purposes of determining this holding
period, any purchases you make during the quarter will be aggregated and deemed
to have been made on the last day of the quarter. In the case of Class C shares,
solely for purposes of determining this holding period, any purchases you make
during a month will be deemed to have been made on the last day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
CLASS B SHARES: SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO
YEAR SINCE PURCHASE CHARGE
------------------- --------------------
<S> <C>
First............................................ 5%
Second........................................... 4%
Third............................................ 3%
Fourth........................................... 3%
Fifth............................................ 2%
Sixth............................................ 1%
Seventh and thereafter........................... 0%
</TABLE>
IMDI currently intends to pay to dealers a sales commission of 4% of the
sale price of Class B shares they have sold, and will receive the entire amount
of the CDSC paid by shareholders on the redemption of Class B shares to finance
the 4% commission and related marketing expenses.
17
<PAGE> 18
With respect to Class C shares, IMDI currently intends to pay to dealers a
sales commission of 1% of the sale price of Class C shares that they have sold,
a portion of which is to compensate the dealers for providing Class C
shareholder account services during the first year of investment. IMDI will
receive the entire amount of the CDSC paid by shareholders on the redemption of
Class C shares to finance the 1% commission and related marketing expenses.
Pursuant to separate distribution plans for the Funds' Class B and Class C
shares, IMDI bears various promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons other than shareholders.
Under the Funds' Class B Plan, IMDI retains .75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and pays a continuing
service fee to qualified dealers at an annual rate of .25% of qualified
investments. Under the Class C Plan, IMDI pays continuing service/distribution
fees to qualified dealers at an annual rate of 1.00% of qualified investments
after the first year of investment (.25% of which represents a service fee).
CONVERSION OF CLASS B SHARES: Your Class B shares and an appropriate
portion of both reinvested dividends and capital gains on those shares will be
converted into Class A shares automatically no later than the month following
eight years after the shares were purchased, resulting in lower annual
distribution fees. If you exchanged Class B shares into a Fund from Class B
shares of another Ivy fund, the calculation will be based on the time the shares
in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is waived for (i)
redemptions in connection with distributions not exceeding 12% annually of the
initial account balance (i.e., the value of the shareholder's Class B or Class C
Fund account at the time of the initial distribution) (ia) following retirement
under a tax qualified retirement plan, or (ib) upon attaining age 59 1/2 in the
case of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or
a Keogh Plan; (ii) redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or complete redemption following
the death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is named, provided
that the redemption is requested within one year of death or disability. IMDI
may require documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at its own expense,
pay concessions in addition to those described above to dealers that satisfy
certain criteria established from time to time by IMDI. These conditions relate
to increasing sales of shares of the Funds over specified periods and to certain
other factors. These payments may, depending on the dealer's satisfaction of the
required conditions, be periodic and may be up to (i) 0.25% of the value of Fund
shares sold by the dealer during a particular period, and (ii) 0.10% of the
value of Fund shares held by the dealer's customers for more than one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your registered securities
representative, by mail, or by telephone. A CDSC may apply to certain Class A
share redemptions, to Class B shares that are redeemed within six years of
purchase and to Class C shares that are redeemed within one year of purchase.
All redemptions are made at the NAV next determined after a redemption request
has been received in good order. Requests for redemptions must be received by
4:00 p.m. Eastern time to be processed at the NAV for that day. Any redemption
request in good order that is received after 4:00 p.m. Eastern time will be
processed at the price determined on the following business day. If you own
shares of more than one class of a Fund, the Fund will redeem first the shares
having the highest 12b-1 fees; any shares subject to a CDSC will be redeemed
last unless you specifically elect otherwise.
When shares of a Fund are redeemed, the Fund normally will send redemption
proceeds to you on the next business day, but may take up to seven business days
(or longer in the case of shares recently purchased by check). Under unusual
circumstances, a Fund may suspend redemptions or postpone payment to the extent
permitted by Federal securities laws. The proceeds of the redemption may be more
or less than the purchase price of your shares, depending upon, among other
factors, the market value of the Fund's securities at the time of the
redemption. If the redemption is for over $50,000, or the proceeds are to be
sent to an address other than the address of record, or an address change has
occurred in the last 30 days, it must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a redemption, please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is responsible for
promptly transmitting redemption orders. Redemptions requested by dealers will
be made at the NAV (less any applicable CDSC) determined at the close of regular
trading (4:00 p.m. Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are considered to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the account registration, fund number,
account number, and dollar amount or number of shares to be redeemed.
- Signatures of all registered owners whose names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the case of estates,
trusts, guardianships, corporations, unincorporated associations
retirement plan trustees or others acting in representative capacities).
The dollar amount or number of shares indicated for redemption must not
exceed the available shares or NAV of your account at the next-determined
prices. If your request exceeds these limits, then the trade will be rejected in
its entirety.
Mail your request to IMSC at one of the addresses on pages 14-15 of this
Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per
day over the telephone by contacting IMSC at 1-800-777-6472. In times of unusual
economic or market changes, the telephone redemption privilege may be difficult
to implement. If you are unable to execute your transaction by telephone, you
may want to consider placing the order in writing and sending it by mail or
overnight courier.
Checks will be made payable to the current account registration and sent to
the address of record. If there has been a change of address in the last 30
days, please use the instructions for redemption requests by mail described
above. A signature guarantee would be required.
Requests for telephone redemptions will be accepted from the registered
owner of the account, the designated registered representative or the registered
representative's assistant.
18
<PAGE> 19
Shares held in certificate form cannot be redeemed by telephone.
If Section 6E of the Account Application is not completed, telephone
redemption privileges will be provided automatically. Although telephone
redemptions may be a convenient feature, you should realize that you may be
giving up a measure of security that you may otherwise have if you terminated
the privilege and redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures that require personal identification
prior to acting on redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
Receiving Your Proceeds by Federal Funds Wire: For shareholders who
established this feature at the time they opened their account, telephone
instructions will be accepted for redemption of amounts up to $50,000 ($1,000
minimum) and proceeds will be wired on the next business day to a predesignated
bank account.
In order to add this feature to an existing account or to change existing
bank account information, please submit a letter of instructions including your
bank information to IMSC at the address provided above. The letter must be
signed by all registered owners, and their signatures must be guaranteed.
Your account will be charged a fee of $10 each time redemption proceeds are
wired to your bank. Your bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor any of the Funds can be responsible for the efficiency of
the Federal Funds wire system or the shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and subject to state law
requirements, a Fund may redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000 for more than 12 months.
A Fund will not redeem an account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do so. No redemption will be
made if a shareholder's account falls below the minimum due to a reduction in
the value of the Fund's portfolio securities. This provision does not apply to
IRAs, other retirement accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions, we require a
signature guarantee in order to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank account (if this
option was not selected on your original application, or if you are
changing the bank wire information).
A signature guarantee may be obtained only from an eligible guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended. An eligible guarantor institution includes banks, brokers, dealers,
municipal securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. The
signature guarantee must not be qualified in any way. Notarizations from notary
publics are not the same as signature guarantees, and are not accepted.
Circumstances other than those described above may require a signature
guarantee. Please contact IMSC at 1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are
automatically reinvested at NAV in additional shares of the same class of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital gains are
automatically invested at NAV in another Ivy fund of the same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in
cash. Capital gains will be reinvested at NAV in additional shares of the same
class of a fund or another Ivy fund of the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will
be paid in cash.
If you wish to have your cash distributions deposited directly to your bank
account via electronic funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address other than the
address of record you must provide IMSC with a letter of instruction signed by
all registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal backup withholding
tax on dividends, capital gains distributions and redemption proceeds, you must
furnish a Fund with your certified tax identification number ("TIN") and certify
that you are not subject to backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a certified TIN, or
such other tax-related certifications as a Fund may require, within 30 days of
opening your new account, each Fund reserves the right to involuntarily redeem
your account and send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by correctly
furnishing your TIN, and making certain certifications, in Section 2 of the
Account Application at the time you open your new account, unless the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt from backup
withholding. Please complete IRS Form W-9 with the Account Application to claim
this exemption. If the registration is for an UGMA/UTMA account, please provide
the social security number of the minor. Alien individuals must furnish their
individual TIN on a completed IRS Form W-9. Other non-U.S. investors who are not
required to have a TIN must provide, with their Account Application, a completed
IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions, most
shareholders elect not to receive certificates. Should you wish to have a
certificate issued, please contact IMSC at 1-800-777-6472 and request that one
be sent to you. (Retirement plan accounts are not eligible for this service.)
Please note
19
<PAGE> 20
that if you were to lose your certificate, you would incur an expense to replace
it.
Certificates requested by telephone for shares valued up to $50,000 will be
issued to the current registration and mailed to the address of record. Should
you wish to have your certificates mailed to a different address, or registered
differently from the current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of a Fund have an exchange privilege with other Ivy funds
(except Ivy International Fund unless they have an existing Ivy International
Fund account). The Funds reserve the right to reject any exchange order.
Class A shareholders may exchange their outstanding Class A shares for Class
A shares of another Ivy fund on the basis of the relative NAV per Class A share,
plus an amount equal to the difference between the sales charge previously paid
on the outstanding Class A shares and the sales charge payable at the time of
the exchange on the new Class A shares. Incremental sales charges are waived for
outstanding Class A shares that have been invested for 12 months or longer.
Class B (and Class C) shareholders may exchange their outstanding Class B
(or Class C) shares for Class B (or Class C) shares of another Ivy fund on the
basis of the relative NAV per Class B (or Class C) share, without the payment of
any CDSC that would otherwise be due upon the redemption of Class B (or Class C)
shares. Class B shareholders who exercise the exchange privilege would continue
to be subject to the original Fund's CDSC schedule (or period) following an
exchange if such schedule is higher (or longer) than the CDSC for the new Class
B shares.
Class I shareholders of Ivy Bond Fund may exchange their outstanding Class I
shares for Class I shares of another Ivy fund on the basis of the relative NAV
per Class I share. Exchanges from any class of Fund shares into an Ivy fund in
which shares are not already held are subject to certain minimum investment
restrictions. See "Exchange of Shares" in the SAI or contact IMSC at
1-800-777-6472 for further details.
Shares resulting from the reinvestment of dividends and other distributions
will not be charged an initial sales charge or a CDSC when exchanged into
another Ivy fund.
Exchanges are considered to be taxable events, and may result in a capital
gain or a capital loss for tax purposes. Before executing an exchange, you
should obtain and read the prospectus and consider the investment objective of
the fund to be purchased. Share certificates must be unissued (i.e., held by a
fund) in order to execute an exchange. Exchanges are available only in states
where they can be legally made. The Funds reserve the right to limit the
frequency of exchanges. Exchanges are accepted only if the registrations of the
two accounts are identical. Amounts to be exchanged must meet minimum investment
requirements for the Ivy fund into which the exchange is made. It is the policy
of the Funds to discourage the use of the exchange privilege for the purpose of
timing short-term market fluctuations. To protect the interests of other
shareholders of a Fund, a Fund may cancel the exchange privileges of any persons
that, in the opinion of the Fund, are using market timing strategies or are
making more than five exchanges per owner or controlling person per calendar
year.
With respect to shares subject to a CDSC, if less than all of an investment
is exchanged out of a Fund, the shares exchanged will reflect, pro rata, the
cost, capital appreciation and/or reinvestment of distributions of the original
investment as well as the original purchase date, for purposes of calculating
any CDSC for future redemptions of the exchanged shares.
Investors who held Ivy Fund shares as of December 31, 1991, or who held
shares of certain funds that were reorganized into an Ivy fund, may be exempt
from sales charges on the exchange of shares between any of the Ivy funds. If
you believe you may be eligible for such an exemption, please contact IMSC at
1-800-235-3322 for additional information.
In calculating the sales charge assessed on an exchange, shareholders will
be allowed to use the Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not
completed, telephone exchange privileges will be provided automatically for
accounts qualifying for this option. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up a measure of
security that you may otherwise have if you terminated the privilege and
exchanged your shares in writing. If you do not wish to make telephone exchanges
or let your registered representative do so on your behalf, you must notify IMSC
in writing.
In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have
the account number of your current fund and the exact name in which it is
registered available to give to the telephone representative.
Each Fund employs reasonable procedures that require personal identification
prior to acting on exchange instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and provide the
following information:
- The name and class of the fund whose shares you currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your exchange to be invested.
- The number of shares or the dollar amount you wish to exchange.
The request must be signed by all registered owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of a Fund have a one-time
privilege of reinvesting all or a part of the proceeds of the redemption back
into Class A shares of that Fund at NAV (without a sales charge) within 60 days
after the date of redemption. IN ORDER TO REINVEST WITHOUT A SALES CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT. The tax status of a gain
realized on a redemption generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption generally may be
disallowed by the IRS if the reinvestment privilege is exercised within 30 days
after the redemption. In addition, upon a reinvestment, the shareholder may not
be permitted to take into account sales charges incurred on the original
purchase of shares in computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by completing the
Account Application, which is attached to this Prospectus. You can also
20
<PAGE> 21
obtain this application by contacting your registered representative or IMSC at
1-800-777-6472. To be eligible, you must continually maintain at least $5,000 in
your account. Payments (minimum distribution amount -- $50) from your account
can be made monthly, quarterly, semi-annually, annually or on a selected monthly
basis, to yourself or any other designated payee. You may elect to have your
systematic withdrawal paid directly to your bank account via EFT, at no charge.
Share certificates must be unissued (i.e., held by a Fund) while the plan is in
effect. A Systematic Withdrawal Plan may not be established if you are currently
participating in the Automatic Investment Method. For more information, please
contact IMSC at 1-800-777-6472.
If payments you receive through the Systematic Withdrawal Plan exceed the
dividends and capital appreciation of your account, you will be reducing the
value of your account. Additional investments made by shareholders participating
in the Systematic Withdrawal Plan must equal at least $1,000 while the plan is
in effect. However, it may not be advantageous to purchase additional Class A,
Class B or Class C shares when you have a Systematic Withdrawal Plan, because
you may be subject to an initial sales charge on your purchase of Class A shares
or to a CDSC imposed on your redemptions of Class B or Class C shares. In
addition, redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan are derived from
the redemption of shares in your account. Any applicable CDSC will be assessed
upon the redemptions. A CDSC will not be assessed on withdrawals not exceeding
12% annually of the initial account balance when the Systematic Withdrawal Plan
was started.
Should you wish at any time to add a Systematic Withdrawal Plan to an
existing account or change payee instructions, you will need to submit a written
request, signed by all registered owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares by completing Sections 6A and 7B of the
Account Application. Attach a "voided" check to your Account Application. At
pre-specified intervals, your bank account will be debited and the proceeds will
be credited to your Ivy account. The minimum investment under this plan is $50
per month ($25 per month for retirement plans). There is no charge to you for
this program.
You may terminate or suspend your Automatic Investment Method by telephone
at any time by contacting IMSC at 1-800-777-6472.
If you have investments being withdrawn from a bank account and we are
notified that the account has been closed, your Automatic Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy fund accounts having the same taxpayer
I.D. number will receive a single quarterly account statement, unless otherwise
specified. This feature consolidates the activity for each account onto one
statement. Requests for quarterly consolidated statements for all other accounts
must be submitted in writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy family of funds offer several tax-sheltered retirement plans that
may fit your needs:
- Traditional and Roth IRAs
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans are $25.
Investors Bank & Trust, which serves as custodian or trustee under the
retirement plan prototypes available from each Fund, charges certain nominal
fees for annual maintenance. A portion of these fees is remitted to IMSC, as
compensation for its services to the retirement plan accounts maintained with
each Fund.
Distributions from retirement plans are subject to certain requirements
under the Code. Certain documentation, including IRS Form W4-P, must be provided
to IMSC prior to taking any distribution. Please contact IMSC for details. The
Ivy family of funds and IMSC assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws, and will not be
responsible for any penalties assessed. For additional information, please
contact your broker, tax adviser or IMSC.
Please call IMSC at 1-800-777-6472 for complete information kits describing
the plans, their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be directed to IMSC at 1-800-777-6472.
21
<PAGE> 22
[This Page Intentionally Left Blank]
<PAGE> 23
ACCOUNT APPLICATION
IVY BOND FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND ----------------------
IVY US EMERGING GROWTH FUND ACCOUNT NUMBER
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for which Ivy is
custodian.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND 101/ 1 / 2 1 / 2 0 / 1 0 / X
USE ----------- -------- ----- ---------- ------ ------ ----- ------ ------
ONLY Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd Exc Cd Red Cd
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 REGISTRATION
[ ] Individual -----------------------------------------------------------------------------------------------
[ ] Joint Tenant Owner, Custodian or Trustee
[ ] Estate
[ ] UGMA/UTMA -----------------------------------------------------------------------------------------------
[ ] Corporation Co-owner or Minor
[ ] Partnership
[ ] Sole Proprietor -----------------------------------------------------------------------------------------------
[ ] Trust Minor's State of Residence
-------------------
Date of Trust -----------------------------------------------------------------------------------------------
[ ] Other ---------- Street
------------------- -----------------------------------------------------------------------------------------------
City State Zip Code
- - - -
-------------------------- -----------------------------
Phone Number -- Day Phone Number -- Evening
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2 TAX ID #
- - or -
---------------------- ------------------------- Citizenship [ ] U.S. [ ] Other
Social Security Number Tax Identification Number ---------------
UNDER PENALTIES OF PERJURY, I CERTIFY BY SIGNING IN SECTION 8 BELOW THAT: (1) THE NUMBER SHOWN IN THIS SECTION IS MY
CORRECT TAXPAYER IDENTIFICATION NUMBER (TIN), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I HAVE NOT BEEN
NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT
ALL INTEREST OR DIVIDENDS, OR (B) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (CROSS OUT
ITEM (2) IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDER REPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.) PLEASE SEE THE "TAX IDENTIFICATION NUMBER" SECTION OF THE
PROSPECTUS FOR ADDITIONAL INFORMATION ON COMPLETING THIS SECTION.
- ------------------------------------------------------------------------------------------------------------------------------------
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the signature and legal
capacity of the Shareholder, and agrees to notify IMSC of any purchases made under a Letter of Intent or Rights of
Accumulation.
---------------------------------------------------- ---------------------------------------------
Dealer Name Representative Name and Number
---------------------------------------------------- ---------------------------------------------
Branch Office Address Representative Phone Number
--------------------------------------------------- ---------------------------------------------
City State Zip Code Authorized Signature Only
- ------------------------------------------------------------------------------------------------------------------------------------
4 INVESTMENTS
A. Enclosed is my check for $ ($1,000 minimum) made payable to the appropriate Fund.
---------------
B. Please invest in [ ] Class A shares [ ] Class B shares [ ] Class C shares [ ] Class I shares (Ivy
Bond Fund only) of the following Fund(s):
$ --------------- Ivy Bond Fund
$ --------------- Ivy Growth Fund
$ --------------- Ivy Growth with Income Fund
$ --------------- Ivy US Emerging Growth Fund
C. I qualify for a reduced sales charge due to the following
privilege (applies only to Class A shares):
[ ] New Letter of Intent (if ROA or 90-day backdate
privilege is applicable, provide account(s) information
below.)
[ ] ROA with the account(s) listed below.
[ ] Existing Letter of Intent with account(s) listed below.
------------------------------------ ------------------------- [ ] or New
Fund Name Account Number
------------------------------------ ------------------------- [ ] or New
Fund Name Account Number
If establishing a Letter of Intent, you will need to purchase Class A shares over a thirteen-month period in
accordance with the provisions in the Prospectus. The aggregate amount of these purchases will be at least equal to
the amount indicated below (see Prospectus for minimum amount required for reduced sales charges).
[ ] $50,000 (Except Ivy Bond Fund) [ ] $100,000 [ ] $250,000 [ ] $500,000
D. FOR DEALER USE ONLY
Confirmed trade orders:
--------------- ---------------- -- ---- ----------------
Confirm Number Number of Shares Trade Date
- ------------------------------------------------------------------------------------------------------------------------------------
5 DISTRIBUTION OPTIONS
A. I would like to reinvest dividends and capital gains into additional shares of the same class in this account at
net asset value unless a different option is checked below.
B. [ ] Reinvest all dividends and capital gains into additional shares of the same class in an account in a
different Ivy fund.
----------------------------------- ------------------------------ [ ] New Account
Fund Name Account Number
C. [ ] Pay all dividends in cash and reinvest capital gains into additional shares of the same class in this
account or an account in a different Ivy fund.
----------------------------------- ------------------------------ [ ] New Account
Fund Name Account Number
D. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ] (By Mail)
7B [ ] (By E.F.T.)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
6 OPTIONAL SPECIAL FEATURES
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
<S> <C> <C> <C>
I wish to invest: My bank account will be debited on or about the
[ ] Annually day of the month of
------------------- ----------
[ ] Semi-Annually day of the months of and
------------------- ---------- ----------
[ ] Quarterly day of the [ ] first month of each calendar quarter
------------------- [ ] second
[ ] third
[ ] Monthly
[ ] once per month day of the month*
--------
[ ] twice day of the month*
--------
[ ] 3 times day of the month*
--------
[ ] 4 times day of the month*
--------
Please invest $ each period starting in the month of in Class A [ ] or Class B [ ] or Class
---------------- -----------
Dollar Amount Month
C [ ] of
-------------------------.
Fund Name
[ ] I have attached a voided check to ensure my correct bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS**
I wish to automatically withdraw funds from my [ ] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually
account in Class A [ ] or Class B [ ] or Class C [ ] of I request the distribution be:
----------
Fund Name [ ] Sent to the address listed in the registration.
[ ] Sent to the special payee listed in Section 7.
[ ] Once [ ] Twice [ ] 3 times [ ] 4 times per month [ ] Invested into additional shares of the same
class of a different Ivy fund:
----------------------
Fund Name
-----------------------
Account Number
Amount $ , starting on or about the day of month*
--------------- -------- --------------------------
Minimum $50
day of month
-------- --------------------------
day of month
-------- --------------------------
NOTE: Account minimum: $5,000 in shares at current offering price
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the
redemption of Fund shares up to $50,000. Proceeds may be wire
transferred to the bank account designated ($1,000 minimum).
(COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES** [ ] YES [ ] NO
I authorize exchanges by telephone among the Ivy family of
funds, upon instructions from any authorized person as more
fully described in the Prospectus. To change this option once
established, written instructions must be received from the
shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS** [ ] YES [ ] NO
The Fund or its agents are authorized to honor telephone
instructions from any authorized person as more fully described
in the Prospectus for the redemption of Fund shares. The amount
of the redemption shall not exceed $50,000 and the proceeds are
to be payable to the shareholder of record and mailed to the
address of record. To change this option once established,
written instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
* There must be a period of at least seven calender days between each investment/withdrawal period.
** This option may not be selected if shares are issued in certificate form.
- ------------------------------------------------------------------------------------------------------------------------------------
7 SPECIAL PAYEE
A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION
Please send all disbursements to this special payee
--------------------------------------------------------
-------------------------------------------------------- Financial Institution
Name of Bank or Individual
-------------------------------------------------------- --------------------------------------------------------
Account Number (if applicable) ABA # Account #
-------------------------------------------------------- --------------------------------------------------------
Street Street
-------------------------------------------------------- --------------------------------------------------------
City/State/Zip City/State/Zip
(Please attach a voided check)
- ------------------------------------------------------------------------------------------------------------------------------------
8 SIGNATURES
Investors should be aware that failure to check "No" under Section 6D or 6E above means that the Telephone
Exchange/Redemption Privileges will be provided. The Funds employ reasonable procedures that require personal
identification prior to acting on exchange/redemption instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures, a Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Please see "Exchange Privilege" and "How to Redeem Shares" in the Prospectus for more
information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the Fund for my own account or for the account of
the organization named in Section 1. I have received a current Prospectus and understand its terms are incorporated
in this application by reference. I am certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
------------------------------------------------------------- ---------
Signature of Owner, Custodian, Trustee or Corporate Officer Date
------------------------------------------------------------- ---------
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
01IUSXX0498 (Remember to Sign Section 8)
</TABLE>
<PAGE> 25
APRIL 30, 1998 IVY FUNDS(R)
Ivy
U.S. Equity
and Fixed
Income
Funds
Advisor
Class Shares
- -----------------
PROSPECTUS
- -----------------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ARTWORK]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Ivy Fund (the "Trust") is a registered investment company currently
consisting of eighteen separate portfolios. The Advisor Class shares of four
of these portfolios, as identified below (the "Funds"), are described in this
Prospectus. Each Fund has its own investment objective and policies, and your
interest is limited to the Fund in which you own Advisor Class shares.
The four Funds are:
Ivy Bond Fund
Ivy Growth Fund
Ivy Growth with Income Fund
Ivy US Emerging Growth Fund
This Prospectus sets forth concisely the information about the Funds'
Advisor Class shares that a prospective investor should know before investing.
Please read it carefully and retain it for future reference. Additional
information about the Funds is contained in the Statement of Additional
Information for the Funds' Advisor Class shares dated April 30, 1998 (the
"SAI"), which has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into this Prospectus. The SAI, and the
prospectus for the Funds' other classes of shares, are available upon request
and without charge at the Distributor's address and telephone number printed
below. The SEC maintains a web site (http://www.sec.gov) that contains the SAI
and other material incorporated by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Information............................. 2
The Funds' Financial Highlights................. 2
Investment Objectives and Policies.............. 3
Risk Factors and Investment Techniques.......... 4
Organization and Management of the Funds........ 6
Investment Manager.............................. 6
Fund Administration and Accounting.............. 7
Transfer Agent.................................. 7
Dividends and Taxes............................. 7
Performance Data................................ 8
How to Buy Shares............................... 8
How Your Purchase Price is Determined........... 9
How Each Fund Values its Shares................. 9
How to Redeem Shares............................ 9
Minimum Account Balance Requirements............ 10
Signature Guarantees............................ 10
Choosing a Distribution Option.................. 10
Tax Identification Number....................... 11
Certificates.................................... 11
Exchange Privilege.............................. 11
Systematic Withdrawal Plan...................... 12
Automatic Investment Method..................... 12
Consolidated Account Statements................. 12
Retirement Plans................................ 12
Shareholder Inquiries........................... 12
Account Application............................. 13
</TABLE>
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Chairman Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Keith J. Carlson, President Services Corp. 700 South Federal Highway
Keith J. Carlson James W. Broadfoot, Vice President P.O. Box 3022 Boca Raton, FL 33432
Stanley Channick C. William Ferris, Boca Raton, FL 33431-0922 1-800-456-5111
Frank W. DeFriece, Jr. Secretary/Treasurer 1-800-777-6472
Roy J. Glauber DISTRIBUTOR
Michael G. Landry LEGAL COUNSEL AUDITORS Ivy Mackenzie
Joseph G. Rosenthal Dechert Price & Rhoads Coopers & Lybrand L.L.P. Distributors, Inc.
Richard N. Silverman Boston, MA Ft. Lauderdale, FL Via Mizner Financial Plaza
J. Brendan Swan 700 South Federal Highway
CUSTODIAN Boca Raton, FL 33432
Brown Brothers Harriman & Co. 1-800-456-5111
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 26
EXPENSE INFORMATION
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in each Fund. The inception date for each Fund's Advisor Class shares
was January 1, 1998. The expense ratios shown are based on amounts incurred by
each Fund's Class A shares during the fiscal year ended December 31, 1997.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MAXIMUM SALES LOAD MAXIMUM CONTINGENT
IMPOSED ON PURCHASES DEFERRED SALES CHARGE
(AS A % OF (AS A % OF ORIGINAL
OFFERING PRICE) PURCHASE PRICE)
-------------------- ---------------------
<S> <C> <C>
All Funds................................................... None None
</TABLE>
None of the Funds charges a redemption fee, an exchange fee, or a sales load
on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
12B-1 SERVICE/ TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES FEES EXPENSES EXPENSES
---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
Ivy Bond Fund......................................... 0.72% None 0.50% 1.22%
Ivy Growth Fund....................................... 0.85% None 0.48% 1.33%
Ivy Growth with Income Fund........................... 0.75% None 0.63% 1.38%
Ivy US Emerging Growth Fund........................... 0.85% None 0.57% 1.42%
</TABLE>
EXAMPLES
The following table lists the expenses an investor would pay on a $1,000
investment in a Fund's Advisor Class shares, assuming (1) 5% annual return and
(2) unless otherwise noted, redemption at the end of each time period. These
examples further assume reinvestment of all dividends and distributions, and
that the percentage amounts under "Total Fund Operating Expenses" above remain
the same each year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ivy Bond Fund............................................... $12 $39 $67 $148
Ivy Growth Fund............................................. $14 $42 $73 $160
Ivy Growth with Income Fund................................. $14 $44 $76 $166
Ivy US Emerging Growth Fund................................. $14 $45 $78 $170
</TABLE>
The information presented in the table does not reflect the charge of $10
per transaction that would apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more detailed discussion of the
Funds' fees and expenses, see the following sections of this Prospectus:
"Investment Manager" and "Fund Administration and Accounting," and the following
section of the SAI: "Investment Advisory and Other Services."
THE FUNDS' FINANCIAL HIGHLIGHTS
The inception date for the Funds' Advisor Class shares was January 1, 1998.
Accordingly, no financial information for these shares is presented. The
accounting firm of Coopers & Lybrand L.L.P. will be responsible for auditing
financial information relating to the Funds' Advisor Class shares. Financial
highlights for the Funds' Class A, Class B and Class C shares (and Class I
shares, in the case of Ivy Bond Fund) are contained in a separate Prospectus
dated April 30, 1998. The Funds' Annual Reports are incorporated by reference
into the SAI, and are available upon request from the Funds' transfer agent
(1-800-777-6472).
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<PAGE> 27
INVESTMENT OBJECTIVE AND POLICIES
Each Fund has its own investment objective and policies, which are described
below. Each Fund's investment objective is fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for a Fund's investment objective and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental, and may be
changed by the Board of Trustees of the Trust ("Trustees") without shareholder
approval. There can be no assurance that a Fund's objective will be met. The
different types of securities and investment techniques used by the Funds
involve varying degrees of risk. For information about the particular risks
associated with each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction of a Fund described
in this Prospectus or in the SAI states a maximum percentage of assets that may
be invested in a security or other asset, or describes a policy regarding
quality standards, that percentage limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes place. Thus,
for example, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage that results from circumstances
not involving any affirmative action by the Fund will not be considered a
violation.
IVY BOND FUND: Ivy Bond Fund seeks a high level of current income by
investing primarily in (i) investment grade corporate bonds (those rated Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB
by Standard & Poor's Corporation ("S&P"), or, if unrated, are considered by IMI
to be of comparable quality) and (ii) U.S. Government securities (including
mortgage-backed securities issued by U.S. Government agencies or
instrumentalities) that mature in more than 13 months. As a fundamental policy,
the Fund normally invests at least 65% of its total assets in these fixed income
securities. For temporary defensive purposes, the Fund may invest without limit
in U.S. Government securities maturing in 13 months or less, certificates of
deposit, bankers' acceptances, commercial paper and repurchase agreements. The
Fund may also invest up to 35% of its total assets in such money market
securities in order to meet redemptions or to maximize income to the Fund while
it is arranging longer-term investments.
The Fund may invest up to 35% of its net assets in corporate debt
securities, including zero coupon bonds (subject to the restrictions set forth
below), rated Ba or below by Moody's or BB or below by S&P, or, if unrated, are
considered by IMI to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds). The Fund will not invest in debt securities rated less
than C by either Moody's or S&P. During the twelve months ended December 31,
1997, based upon the dollar-weighted average ratings of the Fund's portfolio
holdings at the end of each month during that period, the Fund had the following
percentages of its total assets invested in debt securities rated in the
categories indicated (all ratings are by either Moody's or S&P, whichever rating
is higher): 3.7% in securities rated Aaa/AAA; 0% in securities rated Aa/AA; 1.9%
in securities rated A/A; 60.4% in securities rated Baa/BBB; 14.2% in securities
rated Ba/BB; 16.3% in securities rated B/B; 0.7% in securities rated Caa/CCC;
and 0% in securities that were unrated. The asset composition of the Fund
subsequent to the period indicated may or may not approximate these figures. See
Appendix A in the SAI for a description of Moody's and S&P's corporate bond
ratings.
The Fund may invest up to 5% of its net assets in dividend-paying common and
preferred stocks (including adjustable rate preferred stocks and securities
convertible into common stocks), municipal bonds, zero coupon bonds, and
securities sold on a "when-issued" or firm commitment basis. As a temporary
measure for extraordinary or emergency purposes, the Fund may borrow from banks
up to 10% of the value of its total assets.
The Fund may invest up to 20% of its net assets in debt securities of
foreign issuers, including non-U.S. dollar-denominated debt securities, American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares ("GDSs"), Eurodollar
securities and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities thereof. The Fund may
also enter into forward foreign currency contracts, but not for speculative
purposes. The Fund may not invest more than 15% of the value of its net assets
in illiquid securities.
The Fund may purchase put and call options, provided the premium paid for
such options does not exceed 10% of the Fund's net assets. The Fund may also
sell covered put options with respect to up to 50% of the value of its net
assets, and may write covered call options so long as not more than 20% of the
Fund's net assets are subject to being purchased upon the exercise of the calls.
For hedging purposes only, the Fund may engage in transactions in interest rate
futures contracts, currency futures contracts and options on interest rate
futures and currency futures contracts.
IVY GROWTH FUND, IVY GROWTH WITH INCOME FUND AND IVY US EMERGING GROWTH
FUND: Each Fund's principal investment objective is long-term capital growth
primarily through investment in equity securities, with current income being a
secondary consideration. Ivy Growth with Income Fund has tended to emphasize
dividend-paying stocks more than the other two Funds. Under normal conditions,
each Fund invests at least 65% of its total assets in common stocks and
securities convertible into common stocks. Ivy Growth Fund and Ivy Growth with
Income Fund invest primarily in common stocks of domestic corporations with low
price-earnings ratios and rising earnings, focusing on established, financially
secure firms with capitalizations over $100 million and more than three years of
operating history. Ivy US Emerging Growth Fund invests primarily in common
stocks (or securities with similar characteristics) of small and medium-sized
companies, both domestic and foreign, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
All of the Funds may invest up to 25% of their net assets in foreign equity
securities, primarily those traded in European, Pacific Basin and Latin American
markets, some of which may be emerging markets involving special risks, as
described below. Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength.
When circumstances warrant, each Fund may invest without limit in investment
grade debt securities (e.g., U.S. Government securities or other corporate debt
securities rated at least Baa by Moody's or BBB by S&P, or, if unrated, are
considered by IMI to be of comparable quality), preferred stocks, or cash or
cash equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements.
Ivy Growth with Income Fund may invest less than 35% of its net assets in
debt securities rated Ba or below by Moody's or BB or below by S&P, or if
unrated, are considered by IMI to be of comparable quality (commonly referred to
as "high yield" or "junk" bonds). Ivy Growth Fund may invest up to 5% of its net
assets in these low-rated debt securities. Neither Fund will invest in debt
securities rated less than C by either Moody's or S&P. (As of December 31, 1997,
neither Fund invested in low-rated debt securities).
3
<PAGE> 28
As a fundamental policy, each Fund may borrow up to 10% of the value of its
total assets, but only for temporary purposes when it would be advantageous to
do so from an investment standpoint. All of the Funds may invest up to 5% of
their net assets in warrants. Each Fund may not invest more than 15% of its net
assets in illiquid securities. All of the Funds may enter into forward foreign
currency contracts. Ivy Growth Fund and Ivy Growth with Income Fund may also
invest in equity real estate investment trusts.
Each of the Funds may write put options, with respect to not more than 10%
of the value of its net assets, on securities and stock indices, and may write
covered call options with respect to not more than 25% of the value of its net
assets. Each Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its net assets. For hedging purposes
only, each Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. A Fund's equivalent exposure in stock
index futures contracts will not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
BANK OBLIGATIONS: The bank obligations in which the Funds may invest
include certificates of deposit, bankers' acceptances and other short-term debt
obligations. Investments in certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets in excess of $1 billion,
and (ii) other banks if the principal amount of the obligation is fully insured
by the Federal Deposit Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are limited to obligations of
Federal or state-chartered institutions whose total assets exceed $1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on a Fund's net asset value
of any increase or decrease in the value of the Fund's portfolio securities.
Money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations,
and finance companies. Each Fund's investments in commercial paper are limited
to obligations rated Prime-1 by Moody's or A-1 by S&P, or if not rated, issued
by companies having an outstanding debt issue currently rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible securities in which the Funds may
invest include corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible securities can be converted
into equity securities, their value will normally vary in some proportion with
those of the underlying equity security. Convertible securities usually provide
a higher yield than the underlying equity, so the price decline of a convertible
security may sometimes be less substantial than that of the underlying equity
security.
DEBT SECURITIES, IN GENERAL: Investment in debt securities, including
municipal securities, involves both interest rate and credit risk. Generally,
the value of debt instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt securities
generally increases. Conversely, rising interest rates tend to cause the value
of debt securities to decrease. Bonds with longer maturities generally are more
volatile than bonds with shorter maturities. The market value of debt securities
also varies according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the increased risk that
the issuer will be unable to meet its obligations on interest or principal
payments at the time called for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates,
which are mortgage-backed securities). When such securities are held to
maturity, the payment of principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible credit quality.
U.S. Government securities that are not held to maturity are subject to
variations in market value caused by fluctuations in interest rates.
Mortgage-backed securities are securities representing part ownership of a
pool of mortgage loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the loans typically
will be substantially less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the security. Conversely, rising interest rates tend to
decrease the rate of prepayment, thereby lengthening the security's actual
average life (and increasing the security's price volatility.) Since it is not
possible to predict accurately the average life of a particular pool, and
because prepayments are reinvested at current rates, mortgage-backed securities
may involve significantly greater price and yield volatility than traditional
debt securities.
INVESTMENT GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered "medium grade" obligations) generally have an
adequate capacity to pay interest and repay principal, but lack outstanding
investment characteristics and have some speculative characteristics.
LOW-RATED DEBT SECURITIES: Securities rated lower than Baa by Moody's or
BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), are considered to have predominately speculative
characteristics with respect to the issuer's capacity to pay interest and repay
principal. Investors in those Funds that invest in these securities should be
aware of and willing to accept the special risks associated with these
securities.
While high yield debt securities are likely to have some quality and
protective characteristics, these qualities are largely outweighed by the risk
of exposure to adverse conditions and other uncertainties. Accordingly,
investments in such securities, while generally providing for greater income and
potential opportunity for gain than investments in higher-rated securities, also
entail greater risk (including the possibility of default or bankruptcy of the
issuer of such securities) and generally involve greater price volatility than
securities in higher rating categories. IMI seeks to reduce risk through
diversification (including investments in foreign securities), credit analysis
and attention to current developments and trends in both the economy and
financial markets. Should the rating of a portfolio security be downgraded, IMI
will determine whether it is in the affected Fund's best interest to retain or
dispose of the security (unless the security is downgraded below the rating of
C, in which case IMI most likely would dispose of the security based on then
existing
4
<PAGE> 29
market conditions). For additional information regarding the risks associated
with investing in high yield bonds, see the SAI (in particular, Appendix A,
which contains a more complete description of the ratings assigned by Moody's
and S&P).
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: A Fund usually effects its currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. However, some price spread on currency exchange
(e.g., to cover service charges) is usually incurred when a Fund converts assets
from one currency to another. A Fund may also be affected unfavorably by
fluctuations in the relative rates of exchange between the currencies of
different nations or by political or economic developments in the U.S. or
abroad. For example, significant uncertainty surrounds the proposed introduction
of the euro (a common currency for the European Union) in January 1999 and its
effect on the value of securities denominated in local European currencies.
These and other currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the Funds.
FOREIGN SECURITIES: The foreign securities in which the Funds invest may
include non-U.S. dollar-denominated securities, Eurodollar securities, sponsored
or unsponsored ADRs, GDRs, ADSs and GDSs, and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions or
instrumentalities thereof). Investors should consider carefully the special
risks that arise in connection with investing in securities issued by companies
and governments of foreign nations, which are in addition to those risks that
are generally associated with the Funds' investments.
In many foreign countries there is less regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. For example, foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and foreign securities
transactions may be subject to higher brokerage costs. There also tends to be
less publicly available information about issuers in foreign countries, and
foreign securities markets of many of the countries in which the Funds may
invest may be smaller, less liquid and subject to greater price volatility than
those in the United States. Securities issued in emerging market countries,
including the developing countries of Latin America and Eastern Europe, may be
even less liquid and more volatile than securities of issuers operating in more
developed economies (e.g., countries in other parts of Europe). Generally, price
fluctuations in the Funds' foreign security holdings are likely to be high
relative to those of securities issued in the United States.
Other risks include the possibility of expropriation, nationalization or
confiscatory taxation, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), difficulties in
pricing, default in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social instability, or
other developments that could adversely affect the Funds' foreign investments.
In addition, investing in foreign securities usually involves the use of foreign
currencies. For a description of the risks associated with such currencies, see
the SAI.
The risks of investing in foreign securities (described above) are likely to
be intensified in the case of investments in issuers domiciled or doing
substantial business in countries with emerging or developing economies
("emerging markets"). For example, countries with emerging markets may have
relatively unstable governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of assets). Security
prices in emerging markets can also be significantly more volatile than in the
more developed nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Delayed settlements could cause a Fund to miss attractive investment
opportunities or impair its ability to dispose of portfolio securities,
resulting in a loss if the value of the securities subsequently declines. In
addition, many emerging markets have experienced and continue to experience
especially high rates of inflation. In certain countries, inflation has at times
accelerated rapidly to hyperinflationary levels, creating a negative interest
rate environment and sharply eroding the value of outstanding financial assets
in those countries.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. In order for these
emerging economies to continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is essential. Historically,
there is a strong direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI believes that
investment opportunities (particularly in the energy, environmental services,
natural resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which the Funds and their shareholders will benefit. IMI believes
that similar investment opportunities will be created for companies involved in
providing consumer goods and services (e.g., food, beverages, autos, housing,
tourism and leisure, and merchandising).
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date
at a predetermined price. Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the hedged currencies, they also
tend to limit any potential gain that might result should the value of the
currencies increase. In addition, there may be an imperfect correlation between
a Fund's portfolio holdings of securities denominated in a particular currency
and forward contracts entered into by the Fund, which may prevent the Fund from
achieving the intended hedge or expose the Fund to the risk of currency exchange
loss.
OPTIONS AND FUTURES TRANSACTIONS: The Funds may use various techniques to
increase or decrease their exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other factors that affect the
value of the Funds' securities. These techniques may involve derivative
transactions such as purchasing put and call options, selling put and call
options, and engaging in transactions in foreign currency futures, stock index
futures and related options.
Each Fund may invest in options on securities in accordance with its stated
investment objective and policies. A put option is a short-term contract that
gives the purchaser of the option the right, in return for a premium, to sell
the underlying security or currency to the seller of the option at a specified
price during the term of the option. A call option is a short-term contract that
gives the purchaser the right, in return for a premium, to buy the underlying
security or currency from the seller of the option at a specified price during
the term of the option. An option on a stock index gives the purchaser the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option.
Each Fund may also enter into futures transactions in accordance with its
stated investment objective and policies. An interest rate futures contract is
an agreement between two parties to buy or sell a specified debt security at a
set price on a future date. A foreign currency futures contract is an agreement
to
5
<PAGE> 30
buy or sell a specified amount of a foreign currency for a set price on a future
date. A stock index futures contract is an agreement to take or make delivery of
an amount of cash based on the difference between the value of the index at the
beginning and at the end of the contract period.
Investors should be aware that the risks associated with the use of options
and futures are considerable. Options and futures transactions generally involve
a small investment of cash relative to the magnitude of the risk assumed, and
therefore could result in a significant loss to a Fund if IMI judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments. A Fund may also experience a significant loss if it is
unable to close a particular position due to the lack of a liquid secondary
market. For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
corporation, trust or association that invests in real estate mortgages or
equities for the benefit of its investors. REITs are dependent upon management
skill, may not be diversified and are subject to the risks of financing
projects. Equity REITs are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption under the Investment Company Act
of 1940, as amended (the "1940 Act"). By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and agreed-upon
yield. Each Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. A Fund could experience a delay in obtaining direct ownership
of the underlying collateral, and might incur a loss if the value of the
security should decline.
ILLIQUID SECURITIES: An "illiquid security" is an asset that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security on its books.
Illiquid securities may include securities that are subject to restrictions on
resale ("restricted securities") because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"). Illiquid securities often
offer the potential for higher returns than more readily marketable securities,
but carry the risk that the Fund may not be able to dispose of them at an
advantageous time or price. The Fund may have to bear the expense of registering
restricted securities for resale, and the risk of substantial delays in
effecting such registrations. In addition, issuers of restricted securities may
not be subject to the disclosure and other investor protection requirements that
would apply if their securities were publicly traded.
SMALL COMPANIES: Investing in smaller company stocks involves certain
special considerations and risks that are not usually associated with investing
in larger, more established companies. For example, the securities of small or
new companies may be subject to more abrupt or erratic market movements because
they tend to be thinly traded and are subject to a greater degree to changes in
the issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs associated with
trading in smaller company stocks may be higher than those of larger companies.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: Purchasing securities on a
"when-issued" or firm commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
ZERO COUPON BONDS: Zero coupon bonds are debt obligations issued without
any requirement for the periodic payment of interest, and are issued at a
significant discount from face value. Since the interest on such bonds is, in
effect, compounded, they are subject to greater market value fluctuations in
response to changing interest rates than debt securities that distribute income
regularly. In addition, for Federal income tax purposes, a Fund generally
recognizes and is required to distribute income generated by zero coupon bonds
currently in the amount of the unpaid accrued interest, even though the actual
income will not yet have been received by the Fund.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is organized as a separate, diversified portfolio of the Trust, an
open-end management investment company organized as a Massachusetts business
trust on December 21, 1983. The business and affairs of each Fund are managed
under the direction of the Trustees. Information about the Trustees, as well as
the Trust's executive officers, may be found in the SAI. The Trust has an
unlimited number of authorized shares of beneficial interest, and currently has
18 separate portfolios. Each Fund offers Class A, Class B, Class C and Advisor
Class (only the latter of which is offered by this Prospectus). Ivy Bond Fund
also offers Class I shares. Shares of each Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares). The shares of
each class represent an interest in the same portfolio of Fund investments. Each
class of shares, except for the Advisor Class and Class I has a different Rule
12b-1 distribution plan and bears different distribution fees. Class I shares
are subject to lower administrative service and transfer agency fees than the
Funds' Class A, Class B, Class C and Advisor Class shares. Each class of shares
also has its own sales charge and expense structure that may affect its
performance relative to a Fund's other classes of shares. Shares of each class
have equal rights as to voting, redemption, dividends and liquidation but have
exclusive voting rights with respect to their Rule 12b-1 distribution plans.
The Trust employs IMI to provide business management and investment advisory
services, Mackenzie Investment Management Inc. ("MIMI") to provide
administrative and accounting services, Ivy Mackenzie Distributors, Inc.
("IMDI") to distribute the Funds' shares and Ivy Mackenzie Services Corp.
("IMSC") to provide transfer agent and shareholder-related services for the
Funds. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI. IMI has been an
investment advisor since 1992. As of March 31, 1998, IMI and MIMI had
approximately $3.9 billion and $1.3 billion, respectively, in assets under
management. MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"),
which has been an investment counsel and mutual fund manager in Toronto,
Ontario, Canada for more than 31 years.
INVESTMENT MANAGER
For IMI's business management services and investment advisory services,
each Fund pays a fee based on its average net assets at the percentage rates set
forth below.
Ivy Bond Fund pays a fee that is equal, on an annual basis to .75% of the
first $100 million in average net assets, reduced to .50% of average net assets
in excess of $100 million. For the year ended December 31, 1997, Ivy Bond Fund
paid IMI an investment management fee at an effective rate of .72% of the Fund's
average net assets.
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Ivy US Emerging Growth Fund pays a fee that is equal, on an annual basis, to
.85% of its average net assets. IMI voluntarily limits Ivy US Emerging Growth
Fund's total operating expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation, indemnification, and extraordinary expenses)
to 1.95% of the Fund's average net assets. Fund expenses for the year ended
December 31, 1997 were below this limit. This voluntary expense limitation may
be terminated or revised at any time.
Ivy Growth Fund pays a fee that is equal, on an annual basis, to .85% of its
average net assets. Ivy Growth with Income Fund pays a fee that is equal, on an
annual basis, to .75% of its average net assets.
IMI pays all expenses that it incurs in rendering management services to the
Funds. Each Fund bears its own operational costs. General expenses of the Trust
that are not readily identifiable as belonging to a particular Fund (or a
particular class thereof) are allocated among and charged to each Fund based on
its relative net asset size. Expenses that are attributable to a particular Fund
(or class thereof) will be borne by that Fund (or class) directly.
The investment management fees paid by the Funds are higher than those
charged by many funds that invest primarily in U.S. Securities but not
necessarily higher than the fees charged to funds with investment objectives
similar to those of the Funds.
PORTFOLIO MANAGEMENT: The following individuals have responsibilities for
management of the Funds:
- James W. Broadfoot is President and Chief Investment Officer of IMI and
Vice President of the Trust, and has been a portfolio manager for Ivy US
Emerging Growth Fund since the Fund's inception in 1993, Ivy Growth Fund
since 1994 and Ivy Growth with Income Fund since 1997. Prior to joining
the organization in 1990, Mr. Broadfoot was the principal in an investment
counsel firm specializing in emerging growth companies. Mr. Broadfoot has
25 years of professional investment experience and is a Chartered
Financial Analyst. He has an MBA from The Wharton School of The University
of Pennsylvania.
- Frank DuMond is a portfolio manager for Ivy Growth Fund and Ivy Growth
with Income Fund. Mr. DuMond has served as portfolio manager since 1997,
and prior to that served as a research analyst from 1994 through 1996. Mr.
DuMond joined the organization in 1994 and has four years of professional
investment experience. He is a Chartered Financial Analyst and holds a
Bachelor of Science degree from the Massachusetts Institute of Technology.
- Barbara Trebbi is a Senior Vice President of IMI, and has been a portfolio
manager for Ivy Growth Fund since 1993. Ms. Trebbi joined the organization
in 1988 and has 10 years of professional investment experience. She is a
Chartered Financial Analyst and holds a Graduate Diploma from the London
School of Economics.
- The Ivy Bond Fund is managed using a team approach. Michael Borowsky has
been a member of the team since 1994. During this period he has been
responsible for the selection of high yield bonds and emerging market
debt. Prior to joining Ivy Mackenzie, Mr. Borowsky was a fixed income
specialist at Lehwald, Orosey and Pepe. He holds a Bachelor of Science
degree in finance and economics from Drexel University.
Brian Barrett joined the Ivy Bond Fund team in 1997 after having worked with
the team on a number of global analysis projects. He has broad fixed income
quantative experience. This includes working with Mellon Bond Associates as Vice
President and Director of Research in 1987-1988. In this capacity he was a
member of the Mellon Bank Trust Investment Committee which oversaw $190 billion
of trust and custodial funds. Concurrent with his tenure at Ivy, Dr. Barrett is
an Associate Professor of Finance at the University of Miami (Florida). Dr.
Barrett is a Chartered Financial Analyst and holds a Ph.D in finance from the
Georgia Institute of Technology.
Michael G. Landry, Chairman and Director of Ivy Management, Inc., was
president of the Fund from 1987 to 1996. From 1997 to present, Mr. Landry is
Chairman of Ivy Bond Fund and is responsible for establishing the overall
investment strategy of the Fund. Prior to joining the firm, Mr. Landry was a
Senior Vice President and portfolio manager with Templeton International. He has
more than 25 years of professional investment experience. Mr. Landry has a
degree in economics from Carleton University.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Funds, such as
maintaining the registration of Fund shares under state "Blue Sky" laws, and
assisting with the preparation of Federal and state income tax returns,
financial statements and periodic reports to shareholders. MIMI also assists the
Trust's legal counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this arrangement, the
average net assets attributable to each Fund's Advisor Class shares are subject
to a fee, accrued daily and paid monthly, at an annual rate of .10%
MIMI also provides certain accounting and pricing services for the Funds
(see "Fund Accounting Services" in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Funds, and also
provides certain shareholder-related services. Certain broker-dealers that
maintain shareholder accounts with the Funds through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment Advisory and
Other Services" in the SAI).
DIVIDENDS AND TAXES
Distributions you receive from a Fund are reinvested in additional Advisor
Class shares unless you elect to receive them in cash. Dividends ordinarily will
vary from one class to another.
Ivy Growth with Income Fund intends normally to declare a daily dividend,
and pay accumulated dividends quarterly. If a shareholder of the Fund redeems
all of his/her shares at any time prior to payment of a distribution, all
declarations accrued to the date of redemption are paid in addition to the
redemption proceeds. Ivy US Emerging Growth Fund and Ivy Growth Fund will
distribute net investment income and net realized capital gains, if any, at
least once a year. In order to provide steady cash flow to shareholders, Ivy
Bond Fund intends to declare and pay dividends monthly. The Fund will distribute
net realized capital gains, if any, at least once a year. A Fund may make an
additional distribution of net investment income and net realized capital gains
to comply with the calendar year distribution requirement under the excise tax
provisions of Section 4982 of the Code.
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TAXATION: The following discussion is intended for general information
only. You should consult with your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status of distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as a regulated investment company
under the Code. To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any Federal income or excise tax.
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of a Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, are taxable to individual shareholders at a maximum 20%
or 28% capital gains rate, regardless of how long the shareholder has held the
Fund's shares. Dividends are taxable to shareholders in the same manner whether
received in cash or reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in securities that are issued at a discount will result each
year in income to a Fund equal to a portion of the excess of the face value of
the securities over their issue price, even though the Fund receives no cash
interest payments from the securities.
Income and gains received by a Fund from sources within foreign countries
may be subject to foreign withholding and other taxes. Unless a Fund is eligible
to and elects to "pass through" to its shareholders the amount of foreign income
and similar taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of investment company
taxable income received from the Fund will be treated as U.S. source income.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which may be
eligible for reduced Federal tax rates, generally depending upon the
shareholder's holding period for the shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service
("IRS") that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies, authorities and instrumentalities
may be exempt from state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield") is computed
separately for each class of Fund shares in accordance with formulas prescribed
by the SEC. Performance information for each class may be compared in reports
and promotional literature to indices such as the Standard and Poor's 500 Stock
Index, Dow Jones Industrial Average, and Morgan Stanley Capital International
World Index. Advertisements, sales literature and communications to shareholders
may also contain statements of a Fund's current yield, various expressions of
total return and current distribution rate. Performance figures will vary in
part because of the different expense structures of the Funds' different
classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in a Fund for a
specified period, and assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge. "Average annual total return"
represents the average annual compound rate of return of an investment in a
particular class of Fund shares assuming the investment is held for one year,
five years and ten years as of the end of the most recent calendar quarter.
Where a Fund provides total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value, "total return"
is based on the total of all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the original
investment expressed as a percentage of the purchase price.
"Current yield" reflects the income per share earned by a Fund's portfolio
investments, and is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and then annualizing the result. Dividends or
distributions that were paid to a Fund's shareholders are reflected in the
"current distribution rate," which is computed by dividing the total amount of
dividends per share paid by a Fund during the preceding 12 months by the Fund's
current maximum offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield" computation
because it may include distributions to shareholders from sources other than
dividends and interest, short term capital gain and net equalization credits and
will be calculated over a different period of time.
HOW TO BUY SHARES
Advisor Class shares are offered through this Prospectus only to the
following investors:
(i) trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
(ii) any account with assets of at least $10,000 if (a) a financial planner,
trust company, bank trust department or registered investment adviser has
investment discretion, and where the investor pays such person as
compensation for its advice and other services an annual fee of at least
.50% on the assets in the account, or (b) such account is established
under a "wrap fee" program and the account holder pays the sponsor of the
program an annual fee of at least .50% on the assets in the account;
(iii) officers and Trustees of the Trust (and their relatives);
(iv) officers, directors, employees, retired employees, legal counsel and
accountants of IMI, MIMI, and MFC (and their relatives); and
(v) directors, officers, partners, registered representatives, employees and
retired employees (and their relatives) of dealers having a sales
agreement with IMDI (or trustees or custodians of any qualified retirement
plan or IRA established for the benefit of any such person).
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<PAGE> 33
OPENING AN ACCOUNT: Complete and sign the Account Application on the last
page of this Prospectus. Make your check payable to the Fund in which you are
investing. No third party checks will be accepted. Deliver these items to your
registered representative or selling broker, or send them to one of the
addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Funds reserve the right to reject any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment in Advisor
Class shares is $10,000. The minimum additional investment is $250. Initial or
additional amounts for retirement accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at any time through
any of the following options:
By Mail: Complete the investment slip attached to your statement, or write
instructions including the account registration, fund number, and account number
of the shares you wish to purchase. Send your check (payable to the Fund in
which you are investing) and investment slip or written instructions to one of
the addresses above.
Through Your Broker: Deliver to your registered representative or selling
broker the investment slip attached to your statement (or written instructions)
along with your payment.
By Wire: Purchases may also be made by wiring money from your bank account
to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as
follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
By Automatic Investment Method: Complete Sections 6A and 7B on the Account
Application (See "Automatic Investment Method" on page 12 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Advisor Class shares of a Fund is the net asset
value ("NAV") per share.
Share purchases will be made at the next determined price after your
purchase order is received. The price is effective for orders received by IMSC
or by your registered securities dealer prior to the time of the determination
of the NAV. Any orders received after the time of the determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer before the NAV is determined and that
are transmitted through the facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's price. Any loss
resulting from the dealer's failure to submit an order by the deadline will be
borne by that dealer.
You will receive an account statement after any purchase, exchange or full
liquidation. Statements related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further explanation) and/or
systematic withdrawal plans will be sent quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is determined for each
Class of shares as of the close of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open by dividing the value of a Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding, adjusted to the nearest cent. These procedures are described more
completely in the SAI.
The Trustees have established procedures to value a Fund's securities in
order to determine the NAV. Securities and other assets for which market prices
are not readily available are valued at fair value, as determined by IMI and
approved by the Trustees. Money market instruments of a Fund are valued at
amortized cost.
Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange. Trading
on these foreign exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on which there is no
regular trading on the Exchange. If events materially affecting the value of the
Fund's portfolio securities occur between the time when these foreign exchanges
close and the time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and approved by the
Trustees.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at its own expense,
pay concessions to dealers that satisfy certain criteria established from time
to time by IMDI. These conditions relate to increasing sales of shares of the
Funds over specified periods and to certain other factors. These payments may,
depending on the dealer's satisfaction of the required conditions, be periodic
and may be up to (i) .25% of the value of Fund shares sold by the dealer during
a particular period, and (ii) .10% of the value of Fund shares held by the
dealer's customers for more than one year, calculated on an annual basis.
An investor may be charged a transaction fee for Advisor Class shares
purchased or redeemed through a broker or agent other than IMDI.
HOW TO REDEEM SHARES
You may redeem your Advisor Class shares through your registered securities
representative, by mail or by telephone. All redemptions are made at the NAV
next determined after a redemption request has been received in good order.
Requests for redemptions must be received by 4:00 p.m. Eastern time to be
processed at the NAV for that day. Any redemption request in good order that is
received after 4:00 p.m. Eastern time will be processed at the price determined
on the following business day. If you own shares of more than one class of any
Fund, the Fund will redeem first the shares having the highest
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<PAGE> 34
12b-1 fees; any shares subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
When shares of a Fund are redeemed, the Fund normally will send redemption
proceeds to you on the next business day, but may take up to seven business days
(or longer in the case of shares recently purchased by check). Under unusual
circumstances, a Fund may suspend redemptions or postpone payment to the extent
permitted by Federal securities laws. The proceeds of the redemption may be more
or less than the purchase price of your shares, depending upon, among other
factors, the market value of the Fund's securities at the time of the
redemption. If the redemption is for over $50,000, or the proceeds are to be
sent to an address other than the address of record, or an address change has
occurred in the last 30 days, it must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a redemption, please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is responsible for
promptly transmitting redemption orders. Redemptions requested by dealers will
be made at the NAV determined at the close of regular trading (4:00 p.m. Eastern
time) on the day that a redemption request is received in good order by IMSC.
BY MAIL: Requests for redemption in writing are considered to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the account registration, fund number,
account number, and dollar amount or number of shares to be redeemed.
- Signatures of all registered owners whose names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the case of estates,
trusts, guardianships, corporations, unincorporated associations
retirement plan trustees or others acting in representative capacities).
The dollar amount or number of shares indicated for redemption must not
exceed the available shares or NAV of your account at the next-determined
prices. If your request exceeds these limits, then the trade will be rejected in
its entirety.
Mail your request to IMSC at one of the addresses on page 8 of this
Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per
day over the telephone by contacting IMSC at 1- 800-777-6472. In times of
unusual economic or market changes, the telephone redemption privilege may be
difficult to implement. If you are unable to execute your transaction by
telephone, you may want to consider placing the order in writing and sending it
by mail or overnight courier.
Checks will be made payable to the current account registration and sent to
the address of record. If there has been a change of address in the last 30
days, please use the instructions for redemption requests by mail described
above. A signature guarantee would be required.
Requests for telephone redemptions will be accepted from the registered
owner of the account, the designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed by telephone.
If Section 6E of the Account Application is not completed, telephone
redemption privileges will be provided automatically. Although telephone
redemptions may be a convenient feature, you should realize that you may be
giving up a measure of security that you may otherwise have if you terminated
the privilege and redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures that require personal identification
prior to acting on redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
Receiving Your Proceeds by Federal Funds Wire: For shareholders who
established this feature at the time they opened their account, telephone
instructions will be accepted for redemption of amounts up to $50,000 ($1,000
minimum) and proceeds will be wired on the next business day to a predesignated
bank account.
In order to add this feature to an existing account or to change existing
bank account information, please submit a letter of instructions including your
bank information to IMSC at the address provided above. The letter must be
signed by all registered owners, and their signatures must be guaranteed.
Your account will be charged a fee of $10 each time redemption proceeds are
wired to your bank. Your bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor any of the Funds can be responsible for the efficiency of
the Federal Funds wire system or the shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and subject to state law
requirements, a Fund may redeem the accounts of shareholders whose investment
has been less than $10,000 for more than 12 months. A Fund will not redeem an
account unless the shareholder has been given at least 60 days' advance notice
of the Fund's intention to do so. No redemption will be made if a shareholder's
account falls below the minimum due to a reduction in the value of the Fund's
portfolio securities. This provision does not apply to IRAs, other retirement
accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions, we require a
signature guarantee in order to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank account (if this
option was not selected on your original application, or if you are
changing the bank wire information).
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A signature guarantee may be obtained only from an eligible guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended. An eligible guarantor institution includes banks, brokers, dealers,
municipal securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. The
signature guarantee must not be qualified in any way. Notarizations from notary
publics are not the same as signature guarantees, and are not accepted.
Circumstances other than those described above may require a signature
guarantee. Please contact IMSC at 1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are
automatically reinvested at NAV in additional Advisor Class shares of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital gains are
automatically invested at NAV in the Advisor Class shares of another Ivy fund.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in
cash. Capital gains will be reinvested at NAV in additional Advisor Class shares
of a Fund or the Advisor Class shares of another Ivy fund.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will
be paid in cash.
If you wish to have your cash distributions deposited directly to your bank
account via electronic funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address other than the
address of record you must provide IMSC with a letter of instruction signed by
all registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal backup withholding
tax on dividends, capital gains distributions and redemption proceeds, you must
furnish a Fund with your certified tax identification number ("TIN") and certify
that you are not subject to backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a certified TIN, or
such other tax-related certifications as a Fund may require, within 30 days of
opening your new account, each Fund reserves the right to involuntarily redeem
your account and send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by correctly
furnishing your TIN, and making certain certifications, in Section 2 of the
Account Application at the time you open your new account, unless the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt from backup
withholding. Please complete IRS Form W-9 with the Account Application to claim
this exemption. If the registration is for an UGMA/UTMA account, please provide
the social security number of the minor. Alien individuals must furnish their
individual TIN on a completed IRS Form W-9. Other non-U.S. investors who are not
required to have a TIN must provide, with their Account Application, a completed
IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions, most
shareholders elect not to receive certificates. Should you wish to have a
certificate issued, please contact IMSC at 1-800-777-6472 and request that one
be sent to you. (Retirement plan accounts are not eligible for this service.)
Please note that if you were to lose your certificate, you would incur an
expense to replace it.
Certificates requested by telephone for shares valued up to $50,000 will be
issued to the current registration and mailed to the address of record. Should
you wish to have your certificates mailed to a different address, or registered
differently from the current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Advisor Class shareholders may exchange their outstanding Advisor Class
shares for Advisor Class shares of another Ivy fund (other than Ivy
International Fund), or Ivy Money Market Fund, on the basis of the relative NAV
per Advisor Class share. Exchanges into an Ivy fund in which shares are not
already held are subject to certain minimum investment restrictions. See
"Exchange of Shares" in the SAI or contact IMSC at 1-800-777-6472 for further
details. The Funds reserve the right to reject any exchange order.
Exchanges are considered to be taxable events, and may result in a capital
gain or a capital loss for tax purposes. Before executing an exchange, you
should obtain and read the prospectus and consider the investment objective of
the fund to be purchased. Share certificates must be unissued (i.e., held by a
Fund) in order to execute an exchange. Exchanges are available only in states
where they can be legally made. The Funds reserve the right to limit the
frequency of exchanges. Exchanges are accepted only if the registrations of the
two accounts are identical. Amounts to be exchanged must meet minimum investment
requirements for the Ivy fund into which the exchange is made. It is the policy
of the Funds to discourage the use of the exchange privilege for the purpose of
timing short-term market fluctuations. To protect the interests of other
shareholders of a Fund, a Fund may cancel the exchange privileges of any persons
that, in the opinion of the Fund, are using market timing strategies or are
making more than five exchanges per owner or controlling person per calendar
year.
EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not
completed, telephone exchange privileges will be provided automatically for
accounts qualifying for this option. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up a measure of
security that you may otherwise have if you terminated the privilege and
exchanged your shares in writing. If you do not wish to make telephone exchanges
or let your registered representative do so on your behalf, you must notify IMSC
in writing.
In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have
the account number of your current fund and the exact name in which it is
registered available to give to the telephone representative.
Each Fund employs reasonable procedures that require personal identification
prior to acting on exchange instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and provide the
following information:
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<PAGE> 36
- The name and class of the fund whose shares you currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your exchange to be invested.
- The number of shares or the dollar amount you wish to exchange.
The request must be signed by all registered owners.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by completing the
Account Application, which is attached to this Prospectus. You can also obtain
this application by contacting your registered representative or IMSC at
1-800-777-6472. To be eligible, you must continually maintain an account balance
of at least $10,000. Payments (minimum distribution amount -- $50) from your
account can be made monthly, quarterly, semi-annually, annually or on a selected
monthly basis, to yourself or any other designated payee. You may elect to have
your systematic withdrawal paid directly to your bank account via EFT, at no
charge. Share certificates must be unissued (i.e., held by a Fund) while the
plan is in effect. A Systematic Withdrawal Plan may not be established if you
are currently participating in the Automatic Investment Method. For more
information, please contact IMSC at 1-800-777-6472.
If payments you receive through the Systematic Withdrawal Plan exceed the
dividends and capital appreciation of your account, you will be reducing the
value of your account. Additional investments made by shareholders participating
in the Systematic Withdrawal Plan must equal at least $250 while the plan is in
effect. Redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan are derived from
the redemption of shares in your account.
Should you wish at any time to add a Systematic Withdrawal Plan to an
existing account or change payee instructions, you will need to submit a written
request, signed by all registered owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares by completing Sections 6A and 7B of the
Account Application. Attach a "voided" check to your Account Application. At
pre-specified intervals, your bank account will be debited and the proceeds will
be credited to your Ivy account. The minimum investment under this plan is $250
per month ($25 per month for retirement plans). There is no charge to you for
this program.
You may terminate or suspend your Automatic Investment Method by telephone
at any time by contacting IMSC at 1-800-777- 6472.
If you have investments being withdrawn from a bank account and we are
notified that the account has been closed, your Automatic Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy fund accounts having the same taxpayer
I.D. number will receive a single quarterly account statement, unless otherwise
specified. This feature consolidates the activity for each account onto one
statement. Requests for quarterly consolidated statements for all other accounts
must be submitted in writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy Funds offer several tax-sheltered retirement plans that may fit your
needs:
- Traditional and Roth IRAs
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans are $25.
Investors Bank & Trust, which serves as custodian or trustee under the
retirement plan prototypes available from each Fund, charges certain nominal
fees for annual maintenance. A portion of these fees is remitted to IMSC as
compensation for its services to the retirement plan accounts maintained with
each Fund.
Distributions from retirement plans are subject to certain requirements
under the Code. Certain documentation, including IRS Form W4-P, must be provided
to IMSC prior to taking any distribution. Please contact IMSC for details. The
Ivy funds and IMSC assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws, and will not be responsible for
any penalties assessed. For additional information, please contact your broker,
tax adviser or IMSC.
Please call IMSC at 1-800-777-6472 for complete information kits describing
the plans, their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be directed to IMSC at 1-800-777-6472.
12
<PAGE> 37
[This Page Intentionally Left Blank]
<PAGE> 38
[This Page Intentionally Left Blank]
<PAGE> 39
ADVISOR CLASS SHARES
ACCOUNT APPLICATION
___________________
IVY BOND FUND ACCOUNT NUMBER:
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US EMERGING GROWTH FUND
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for which Ivy is
custodian.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND 101/ 1 / 2 1 / 2 0 / 1 0 / X
USE ___________ ________ _____ _________ ______ ______ _____ ______ ______
ONLY Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd Exc Cd Red Cd
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
1 REGISTRATION
[ ] Individual ____________________________________________________________
[ ] Joint Tenant Owner, Custodian or Trustee
[ ] Estate ____________________________________________________________
[ ] UGMA/UTMA Co-owner or Minor
[ ] Corporation ____________________________________________________________
[ ] Partnership Minor's State of Residence
[ ] Sole Proprietor ____________________________________________________________
[ ] Trust Street
[ ] Other ____________________________________________________________
City State Zip Code
___________________
Date of Trust _ _ _ _
[ ] Other __________ ______________________ _______________________
Phone Number __ Day Phone Number __ Evening
___________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
2 TAX ID#
- - or - Citizenship: [ ] U.S. [ ] Other
______________________ _________________________ _____________
Social Security Number Tax Identification Number
UNDER PENALTIES OF PERJURY, I CERTIFY BY SIGNING IN SECTION 8 BELOW THAT: (1) THE NUMBER SHOWN IN
THIS SECTION IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (TIN), AND (2) I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: (A) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (B)
THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (CROSS OUT ITEM (2) IF
YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.) PLEASE SEE THE "TAX IDENTIFICATION
NUMBER" SECTION OF THE PROSPECTUS FOR ADDITIONAL INFORMATION ON COMPLETING THIS SECTION.
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
3 DEARLER INFORMATION
The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the signature and
legal capacity of the Shareholder, and agrees to notify IMSC of any purchases made under a Letter of Intent or Rights of
Accumulation.
________________________________________________ _________________________________________________________________
Dealer Name Representative's Name and Number
________________________________________________ _________________________________________________________________
Branch Office Address Representative's Phone Number
________________________________________________ _________________________________________________________________
City State Zip Code Authorized Signature of Dealer
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
4 INVESTMENTS
A. Enclosed is my check for $ _______________($10,000 minimum) made payable to the appropriate Fund*. Please invest it
as follows:
$ _______________ Ivy Bond Fund (605)
$ _______________ Ivy Growth Fund (630)
$ _______________ Ivy Growth with Income Fund (631)
$ _______________ Ivy US Emerging Growth Fund (639)
*If investing in more than one fund, make your check payable to "Ivy Funds".
B. FOR DEALER USE ONLY
Confirmed trade orders:
_______________ _______________ - ______ ______________
Confirm Number Number of Shares Trade Date
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional
shares in this account at net asset value unless a different option is
checked below.
A. [ ] Reinvest all dividends and capital gains into additional shares of a different Ivy fund.
___________________________ ___________________________________ [ ] New Account
Fund Name Account Number
B. [ ] Pay all dividends in cash and reinvest capital gains into additional shares of this Fund or a differenct Ivy fund.
___________________________ ___________________________________ [ ] New Account
Fund Name Account Number
C. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ] (By Mail)
7B [ ] (By E.F.T.)
</TABLE>
<PAGE> 40
<TABLE>
<S> <C>
6 OPTIONAL SPECIAL FEATURES
____________________________________________________________________________________________________________________________________
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
I wish to invest: My Bank account will be debted on or about the:
[ ] Annually _________________ day of the month of _____________
[ ] Semi-Annually _________________ day of the months of _____________ and ____________
[ ] Quarterly _________________ day of the [ ] first month of each calendar quarter
[ ] second
[ ] third
[ ] Monthly
[ ] once per month ________ day of the month*
[ ] twice ________ day of the month*
[ ] 3 times ________ day of the month*
[ ] 4 times ________ day of the month*
Please invest $_____________ each period starting in the month of _________ in Advisor Class shares of _______________.
Dollar Amount Month Fund Name
[ ] I have attached a voided check to ensure my correct bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS**
I wish to automatically withdraw funds from my [ ] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually
account in Advisor Class shares of _________________ I request the distribution be:
Fund Name [ ] Sent to the address listed in the registration.
[ ] Once [ ] Twice [ ] 3 times [ ] 4 times per month [ ] Sent to the special payee listed in Section 7.
[ ] Invested into additional shares of the same
class of a different Ivy fund: _________________________
Fund Name
|_|_|_|_|_|_|_|_|_|_|
Account Number
Amount $______________, starting on or about the ________ day of __________________________
Minimum $250 month
________ day of __________________________
month
________ day of __________________________
month*
NOTE: Account minimum: $10,000 in shares at current offering price
C. [ ] ELECTRONIC FUNDS TRANSFER FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the redemption of Fund shares up to $50,000. Proceeds may be
wire transferred to the bank account designated ($1,000 minimum). (COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES** [ ] YES [ ] NO
I authorize exchanges by telephone among the Ivy family of funds, upon instructions from any person as more fully
described in the Prospectus. To change this option once established, written instructions must be received from the
shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS** [ ] YES [ ] NO
The Fund or its agents are authorized to honor telephone instructions from any person as more fully described in the
Prospectus for the redemption of Fund shares. The amount of the redemption shall not exceed $50,000 and the proceeds are
to be payable to the shareholder of record and mailed to the address of record. To change this option once established,
written instructions must be received from the shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege will be provided automatically.
* There must be a period of at least seven calendar days between each investment/withdrawal period.
** This option may not be selected if shares are issued in certificate form.
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
7 SPECIAL PAYEE
A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION
Please send all disbursements to this special payee
________________________________________________________________
Financial Institution
___________________________________________________
Name of Bank or Individual
______________________________ _______________________________
ABA # Account #
___________________________________________________
Account Number (if applicable)
________________________________________________________________
___________________________________________________ Street
Street
___________________________________________________ ________________________________________________________________
City/State/Zip City/State/Zip
(Please attach a voided check)
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
8 SIGNATURES
Investors should be aware that failure to check "No" under Section 6D or 6E above means that the Telephone Exchange/Redemptions
Privileges will be provided. The Funds employ reasonable procedures that require personal identification prior to acting on
exchange/redemption instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such
procedures, a Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus for more information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the Fund for my own account or for the account of the organization
named in Section 1. I have received a current Prospectus and understand its terms are incorporated in this application by
reference. I am certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
________________________________________________________________________________ ___________________
Signature of Owner, Custodian, Trustee or Corporate Officer Date
________________________________________________________________________________ ___________________
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
____________________________________________________________________________________________________________________________________
</TABLE>
(Remember to Sign Section 8)
<PAGE> 41
April 30, 1998
IVY
INTERNATIONAL
EQUITY
FUNDS
- ----------
Prospectus
- ----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Ivy Fund (the "Trust") is a registered investment company currently
consisting of eighteen separate portfolios. The Class A, Class B, Class C and
Class I (if applicable) shares of twelve of these portfolios, as identified
below (the "Funds"), are described in this Prospectus. The Advisor Class shares
of the Funds (other than Ivy International Fund) are described in a separate
prospectus dated April 30, 1998. Each Fund has its own investment objective and
policies, and your interest is limited to the Fund in which you own shares.
The twelve Ivy international equity funds are:
Ivy Asia Pacific Fund
Ivy Canada Fund
Ivy China Region Fund
Ivy Developing Nations Fund
Ivy Global Fund
Ivy Global Natural Resources Fund
Ivy Global Science & Technology Fund
Ivy International Fund II
Ivy International Fund
Ivy International Small Companies Fund
Ivy Pan-Europe Fund
Ivy South America Fund
This Prospectus sets forth concisely the information about the Funds
that a prospective investor should know before investing. Please read it
carefully and retain it for future reference. Additional information about the
Funds is contained in the Statement of Additional Information for the Funds
dated April 30, 1998 (the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. The SAI is available upon request and without charge from the Trust
at the Distributor's address and telephone number below. The SEC maintains a web
site (http://www.sec.gov) that contains the SAI and other material incorporated
by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
IVY FUNDS(R)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Expense Information ........................................ 2
The Funds' Financial Highlights ............................ 6
Investment Objective and Policies .......................... 15
Risk Factors and Investment Techniques ..................... 20
Organization and Management of the Funds ................... 24
Investment Manager ......................................... 25
Fund Administration and Accounting ......................... 26
Transfer Agent ............................................. 26
Alternative Purchase Arrangements .......................... 26
Dividends and Taxes ........................................ 27
Performance Data ........................................... 27
How to Buy Shares .......................................... 27
How Your Purchase Price is Determined ...................... 28
How Each Fund Values its Shares ............................ 28
Initial Sales Charge Alternative-Class A Shares ............ 28
Contingent Deferred Sales Charge-Class A Shares ............ 29
Qualifying for a Reduced Sales Charge ...................... 29
Contingent Deferred Sales Charge Alternative-
Class B and Class C Shares ........................ 30
How to Redeem Shares ....................................... 31
Minimum Account Balance Requirements ....................... 32
Signature Guarantees ....................................... 32
Choosing a Distribution Option ............................. 32
Tax Identification Number .................................. 32
Certificates ............................................... 32
Exchange Privilege ......................................... 33
Reinvestment Privilege ..................................... 33
Systematic Withdrawal Plan ................................. 33
Automatic Investment Method ................................ 34
Consolidated Account Statements ............................ 34
Retirement Plans ........................................... 34
Shareholder Inquiries ...................................... 34
Account Application ........................................ 35
</TABLE>
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Chairman Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Keith J. Carlson, President Services Corp. 700 South Federal Highway
Keith J. Carlson James W. Broadfoot, Vice President P.O. Box 3022 Boca Raton, FL 33432
Stanley Channick C. William Ferris, Boca Raton, FL 33431-0922 1-800-456-5111
Frank W. DeFriece, Jr. Secretary/Treasurer 1-800-777-6472
Roy J. Glauber DISTRIBUTOR
Michael G. Landry LEGAL COUNSEL AUDITORS Ivy Mackenzie
Joseph G. Rosenthal Dechert Price & Rhoads Coopers & Lybrand L.L.P. Distributors, Inc.
Richard N. Silverman Boston, MA Ft. Lauderdale, FL Via Mizner Financial Plaza
J. Brendan Swan 700 South Federal Highway
CUSTODIAN Boca Raton, FL 33432
Brown Brothers Harriman & Co. 1-800-456-5111
Boston, MA
</TABLE>
[IVY MACKENZIE LOGO]
<PAGE> 42
EXPENSE INFORMATION
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Unless otherwise noted, the information is based on each
Fund's expenses during fiscal year 1997.
SHAREHOLDER TRANSACTION EXPENSES
All Funds offer Class A, Class B and Class C shares. Class I shares are
offered by Ivy Global Science & Technology Fund, Ivy International Fund II, Ivy
International Fund and Ivy International Small Companies Fund (generally
referred to herein as the "Class I Funds").
<TABLE>
<CAPTION>
MAXIMUM SALES LOAD MAXIMUM CONTINGENT
IMPOSED ON PURCHASES DEFERRED SALES CHARGE
ALL FUNDS (AS A % OF (AS A % OF ORIGINAL
OFFERING PRICE) PURCHASE PRICE)
-------------------- ---------------------
<S> <C> <C>
Class A..................................................... 5.75%(1) None(2)
Class B..................................................... None 5.00%(3)
Class C..................................................... None 1.00%(4)
Class I..................................................... None None
</TABLE>
None of the Funds charges a redemption fee, an exchange fee, or a sales load on
reinvested dividends.
- ---------------
(1) Class A shares may be purchased under a variety of plans that provide for
the reduction or elimination of the sales charge. See "Initial Sales Charge
Alternative--Class A Shares" and "Qualifying for a Reduced Sales Charge."
(2) A contingent deferred sales charge ("CDSC") may apply to the redemption of
Class A shares that are purchased without an initial sales charge. See
"Purchases of Class A Shares at Net Asset Value" and "Contingent Deferred
Sales Charge -- Class A Shares."
(3) The maximum CDSC on Class B shares applies to redemptions during the first
year after purchase. The charge declines to 4% during the second year; 3%
during the third and fourth years; 2% during the fifth year; 1% during the
sixth year; and 0% in the seventh year and thereafter.
(4) The CDSC on Class C shares applies only to redemptions during the first year
after purchase.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
12B-1 SERVICE/ TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES FEES EXPENSES EXPENSES(1)
---------- -------------- -------- -----------
<S> <C> <C> <C> <C>
IVY CANADA FUND
Class A................................................... 0.85% 0.40% 1.64% 2.89%
Class B................................................... 0.85% 1.00%(3) 1.38% 3.23%
Class C................................................... 0.85% 1.00%(3) 1.29% 3.14%
IVY GLOBAL FUND
Class A................................................... 1.00% 0.25% 0.82% 2.07%
Class B................................................... 1.00% 1.00%(3) 0.82% 2.82%
Class C................................................... 1.00% 1.00%(3) 0.82% 2.82%
IVY GLOBAL NATURAL RESOURCES FUND
Class A................................................... 0.22%(2) 0.25% 1.63% 2.10%
Class B................................................... 0.22%(2) 1.00%(3) 1.64% 2.86%
Class C................................................... 0.22%(2) 1.00%(3) 1.86% 3.08%
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
Class A................................................... 1.00% 0.25% 0.86% 2.11%
Class B................................................... 1.00% 1.00%(3) 0.92% 2.92%
Class C................................................... 1.00% 1.00%(3) 0.85% 2.85%
Class I................................................... 1.00% 0.00% 0.77%(6) 1.77%
IVY INTERNATIONAL FUND II(8)
Class A................................................... 0.73%(2) 0.25% 0.82% 1.80%
Class B................................................... 0.73%(2) 1.00%(3) 0.90% 2.63%
Class C................................................... 0.73%(2) 1.00%(3) 0.90% 2.63%
Class I................................................... 0.73%(2) 0.00% 0.73%(6) 1.46%
IVY INTERNATIONAL FUND
Class A................................................... 1.00% 0.23%(4) 0.36% 1.59%
Class B................................................... 1.00% 1.00%(3) 0.42% 2.42%
Class C................................................... 1.00% 1.00%(3) 0.41% 2.41%
Class I................................................... 1.00% 0.00% 0.18%(6) 1.18%
IVY PAN-EUROPE FUND(8)
Class A................................................... 0.00%(2) 0.25% 1.95%(5) 2.20%
Class B................................................... 0.00%(2) 1.00%(3) 2.29%(5) 3.29%
Class C................................................... 0.00%(2) 1.00%(3) 1.95%(5) 2.95%
</TABLE>
2
<PAGE> 43
<TABLE>
<CAPTION>
12B-1 SERVICE/ GROSS FUND CUSTODY TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING FEE OPERATING
FEES(2) FEES EXPENSES(7) EXPENSES(7) CREDITS EXPENSES(1)
---------- -------------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
IVY ASIA PACIFIC FUND
Class A....................................... 0.00% 0.25% 1.86%(5) 2.11% 0.20% 1.91%
Class B....................................... 0.00% 1.00%(3) 1.86%(5) 2.86% 0.20% 2.66%
Class C....................................... 0.00% 1.00%(3) 1.74%(5) 2.74% 0.20% 2.54%
IVY CHINA REGION FUND
Class A....................................... 0.93% 0.25% 1.26% 2.44% 0.24% 2.20%
Class B....................................... 0.93% 1.00%(3) 1.24% 3.17% 0.24% 2.93%
Class C....................................... 0.93% 1.00%(3) 1.12% 3.05% 0.24% 2.81%
IVY DEVELOPING NATIONS FUND
Class A....................................... 0.92% 0.25% 1.14% 2.31% 0.12% 2.19%
Class B....................................... 0.92% 1.00%(3) 1.17% 3.09% 0.12% 2.97%
Class C....................................... 0.92% 1.00%(3) 1.20% 3.12% 0.12% 3.00%
IVY INTERNATIONAL SMALL COMPANIES FUND
Class A....................................... 0.00% 0.25% 2.25%(5) 2.50% 0.39% 2.11%
Class B....................................... 0.00% 1.00%(3) 2.31%(5) 3.31% 0.39% 2.92%
Class C....................................... 0.00% 1.00%(3) 2.23%(5) 3.23% 0.39% 2.84%
Class I....................................... 0.00% 0.00% 2.16%(5)(6) 2.16% 0.39% 1.77%
IVY SOUTH AMERICA FUND
Class A....................................... 0.27% 0.25% 1.93% 2.45% 0.27% 2.18%
Class B....................................... 0.27% 1.00%(3) 1.96% 3.23% 0.27% 2.96%
Class C....................................... 0.27% 1.00%(3) 2.03% 3.30% 0.27% 3.03%
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Ivy Management, Inc. ("IMI") currently limits Total Fund
Operating Expenses (excluding Rule 12b-1 fees and certain
other items, and net of any custody fee credits) for all
Funds except Ivy Canada Fund and Ivy International Fund to
an annual rate of 1.95% (1.50% in the case of Ivy
International Fund II) of each Fund's average net assets.
(2) After fee reimbursements (see note 1 above). Without fee
reimbursements, Management Fees would have been 1.00%.
(3) Long-term investors may, as a result of the Fund's 12b-1
fees, pay more than the economic equivalent of the maximum
front-end sales charge permitted by the Conduct Rules of the
National Association of Securities Dealers, Inc. ("NASD").
(4) Rule 12b-1 Service Fees paid by Class A shares may increase,
but are subject to a maximum of 0.25%. See "Alternative
Purchase Arrangements."
(5) After expense reimbursements (see note 1 above). Without
expense reimbursements, Other Expenses would have increased
8.06% for Ivy Asia Pacific Fund; 2.37% for Ivy International
Small Companies Fund and 26.21% for Ivy Pan-Europe Fund.
(6) "Other Expenses" of Class I shares are lower than such
expenses for Class A, Class B and Class C shares. See "Fund
Administration and Accounting" in this Prospectus and
"Transfer Agent" in the SAI.
(7) Does not reflect custody fee credits generated by uninvested
cash balances maintained by the Funds with their custodian.
(8) Expense information is based on annualized amounts from May
13, 1997 (commencement) to December 31, 1997.
</TABLE>
3
<PAGE> 44
EXAMPLES
The following table lists the expenses that an investor would pay on a
$1,000 investment, assuming (1) 5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These examples further assume
reinvestment of all dividends and distributions, and that the percentage amounts
under "Total Fund Operating Expenses" or "Gross Fund Operating Expenses", if the
fund received custody fee credits, above, remain the same each year. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY ASIA PACIFIC FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $78 $120 $164 $288
Class B Shares.............................................. $79(1) $119(2) $171(3) $301(4)
Class B Shares (no redemption).............................. $29 $ 89 $151 $301(4)
Class C Shares.............................................. $38(5) $ 85 $145 $307
Class C Shares (no redemption).............................. $28 $ 85 $145 $307
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY CANADA FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $85 $142 $201 $360
Class B Shares.............................................. $83(1) $129(2) $189(3) $345(4)
Class B Shares (no redemption).............................. $33 $ 99 $169 $345(4)
Class C Shares.............................................. $42(5) $ 97 $164 $345
Class C Shares (no redemption).............................. $32 $ 97 $164 $345
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY CHINA REGION FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $81 $129 $180 $319
Class B Shares.............................................. $82(1) $128(2) $186(3) $331(4)
Class B Shares (no redemption).............................. $32 $ 98 $166 $331(4)
Class C Shares.............................................. $41(5) $ 94 $160 $336
Class C Shares (no redemption).............................. $31 $ 94 $160 $336
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY DEVELOPING NATIONS FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $80 $125 $174 $307
Class B Shares.............................................. $81(1) $125(2) $182(3) $322(4)
Class B Shares (no redemption).............................. $31 $ 95 $162 $322(4)
Class C Shares.............................................. $41(5) $ 96 $163 $343
Class C Shares (no redemption).............................. $31 $ 96 $163 $343
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY GLOBAL FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $77 $119 $162 $284
Class B Shares.............................................. $79(1) $117(2) $169(3) $297(4)
Class B Shares (no redemption).............................. $29 $ 87 $149 $297(4)
Class C Shares.............................................. $39(5) $ 87 $149 $315
Class C Shares (no redemption).............................. $29 $ 87 $149 $315
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY GLOBAL NATURAL RESOURCES FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $78 $120 $164 $287
Class B Shares.............................................. $79(1) $119(2) $171(3) $301(4)
Class B Shares (no redemption).............................. $29 $ 89 $151 $301(4)
Class C Shares.............................................. $41(5) $ 95 $162 $339
Class C Shares (no redemption).............................. $31 $ 95 $162 $339
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY GLOBAL SCIENCE & TECHNOLOGY FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $78 $120 $164 $288
Class B Shares.............................................. $80(1) $120(2) $174(3) $305(4)
Class B Shares (no redemption).............................. $30 $ 90 $154 $305(4)
Class C Shares.............................................. $39(5) $ 88 $150 $318
Class C Shares (no redemption).............................. $29 $ 88 $150 $318
Class I Shares**............................................ $19 $ 58 $100 $217
</TABLE>
4
<PAGE> 45
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY INTERNATIONAL FUND II ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $75 $111 $149 $257
Class B Shares.............................................. $77(1) $112(2) $160(3) $276(4)
Class B Shares (no redemption).............................. $27 $ 82 $140 $276(4)
Class C Shares.............................................. $37(5) $ 82 $140 $296
Class C Shares (no redemption).............................. $27 $ 82 $140 $296
Class I Shares**............................................ $15 $ 46 $ 80 $175
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY INTERNATIONAL FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $73 $105 $139 $236
Class B Shares.............................................. $75(1) $105(2) $149(3) $255(4)
Class B Shares (no redemption).............................. $25 $ 75 $129 $255(4)
Class C Shares.............................................. $34(5) $ 75 $129 $275
Class C Shares (no redemption).............................. $24 $ 75 $129 $275
Class I Shares**............................................ $12 $ 37 $ 65 $143
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY INTERNATIONAL SMALL COMPANIES FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $81 $131 $183 $325
Class B Shares.............................................. $83(1) $132(2) $193(3) $342(4)
Class B Shares (no redemption).............................. $33 $102 $173 $342(4)
Class C Shares.............................................. $43(5) $ 99 $169 $353
Class C Shares (no redemption).............................. $33 $ 99 $169 $353
Class I Shares**............................................ $18 $ 56 $ 96 $208
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY PAN-EUROPE FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $79 $122 $169 $296
Class B Shares.............................................. $83(1) $131(2) $192(3) $334(4)
Class B Shares (no redemption).............................. $33 $101 $172 $334(4)
Class C Shares.............................................. $40(5) $ 91 $155 $327
Class C Shares (no redemption).............................. $30 $ 91 $155 $327
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY SOUTH AMERICA FUND ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares*............................................. $81 $129 $181 $320
Class B Shares.............................................. $83(1) $129(2) $189(3) $335(4)
Class B Shares (no redemption).............................. $33 $ 99 $169 $335(4)
Class C Shares.............................................. $43(5) $102 $172 $359
Class C Shares (no redemption).............................. $33 $102 $172 $359
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Assumes deduction of the maximum 5.75% initial sales charge
at the time of purchase and no deduction of a CDSC at the
time of redemption.
** Class I Shares are not subject to an initial sales charge at
the time of purchase, nor are they subject to the deduction
of a CDSC at the time of redemption.
(1) Assumes deduction of a 5% CDSC at the time of redemption.
(2) Assumes deduction of a 3% CDSC at the time of redemption.
(3) Assumes deduction of a 2% CDSC at the time of redemption.
(4) Assumes conversion to Class A shares at the end of the
eighth year, and therefore reflects Class A expenses for
years nine and ten.
(5) Assumes deduction of a 1% CDSC at the time of redemption.
</TABLE>
The information presented in the table does not reflect the charge of $10
per transaction that would apply if a shareholder elects to have redemption
proceeds wired to his or her bank account. For a more detailed discussion of the
Funds' fees and expenses, see the following sections of this Prospectus:
"Investment Manager" and "Fund Administration and Accounting," and "Investment
Advisory and Other Services" in the SAI.
5
<PAGE> 46
THE FUNDS' FINANCIAL HIGHLIGHTS
Unless otherwise noted, the tables that follow are for fiscal periods ending
December 31 of each year. The accounting firm of Coopers & Lybrand L.L.P. has
audited all Funds since their inception (with the exception of Ivy International
Fund, which they have audited since December 31, 1992). Their report is included
with each Fund's Annual Report which are incorporated by reference into the SAI.
The information for Ivy International Fund for fiscal periods prior to December
31, 1992 was audited by other independent accountants. The Annual Reports for
these twelve Funds contain additional information about each Fund's performance,
including a comparison to an appropriate securities index. For a copy of your
Fund's Annual Report, call 1-800-777-6472.
Expense and income ratios have been annualized for periods of less than one
year. Beginning December 31, 1996, portfolio turnover rates have not been
annualized for periods of less than one year. Total returns do not reflect sales
charges, and are not annualized for periods of less than one year (unless
otherwise noted). In addition, for fiscal years beginning on or after September
1, 1995, registered investment companies are required to disclose average
commission rates per share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund depending on the mix
of trades executed in various markets where trading practices and commission
rate structures may differ.
IVY ASIA PACIFIC FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- ------- -------
1997(A) 1997(A) 1997(A)
SELECTED PER SHARE DATA -------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 10.00 $10.00 $10.00
------- ------- ------
Income (loss) from investment operations
Net investment income (loss) (b).......... .02 -- --
Net realized and unrealized loss on
investment transactions.................. (3.98) (4.00) (3.99)
------- ------- ------
Total from investment operations....... (3.96) (4.00) (3.99)
------- ------- ------
Less distributions
From net investment income................ .01 -- --
In excess of net investment income........ .02 .01 .02
------- ------- ------
Total distributions.................... .03 .01 .02
------- ------- ------
Net asset value, end of period............... $ 6.01 $ 5.99 $ 5.99
======= ======= ======
Total return (%)............................. (39.58) (39.96) (39.94)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $ 692 $ 929 $ 764
Ratio of expenses to average net assets(c)
With expense reimbursement(%)............... 2.11 2.86 2.74
Without expense reimbursement(%)............ 10.17 10.92 10.80
Ratio of net investment income (loss) to
average net assets(%)(b).................... .63 (.12) --
Portfolio turnover rate(%)................... 1 1 1
Average commission rate...................... $ .0070 $.0070 $.0070
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) The Fund commenced operations on January 1, 1997.
(b) Net investment income (loss) is net of expenses reimbursed
by manager.
(c) Total expenses include fees paid indirectly through an
expense offset arrangement.
</TABLE>
6
<PAGE> 47
IVY CANADA FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
1997 1996 1995 1994(A) 1994(B) 1993(B) 1992(B)
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 9.64 $ 9.21 $ 8.90 $ 9.85 $10.04 $ 7.43 8.89
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (loss).............. (.22) (.21) (.19)(g) (.11) (.11) (.01) (.12)
Net realized and unrealized gain (loss) on
investment transactions.................. (2.19) 2.29 .75 (.81) .24 3.35 (1.34)
------- ------- ------- ------- ------- ------- -------
Total from investment operations....... (2.41) 2.08 .56 (.92) .13 3.34 (1.46)
------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income................ -- -- -- -- -- -- --
In excess of net investment income........ .15 -- -- -- -- -- --
From net realized gain.................... .44 1.65 .25 -- .31 .73 --
In excess of net realized gain............ 1.14 -- -- -- -- -- --
From capital paid-in...................... -- -- -- .03 .01 -- --
------- ------- ------- ------- ------- ------- -------
Total distributions...................... 1.73 1.65 .25 .03 .32 .73 --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period............... $ 5.50 $ 9.64 $ 9.21 $ 8.90 $ 9.85 $10.04 $ 7.43
======= ======= ======= ======= ======= ======= =======
Total return(%).............................. (23.75) 23.86 6.37 (9.38) 1.05 47.10 (16.42)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $ 8,538 $15,249 $19,353 $23,296 $34,549 $30,971 $11,280
Ratio of expenses to average net assets(%)
With expense reimbursement(%)............. -- -- 2.90 -- -- -- --
Without expense reimbursement(%).......... 2.89 2.79 3.23 2.44 2.05 2.63 2.70
Ratio of net investment income (loss) to
average net assets(%)....................... (2.11) (1.78) (2.13)(g) (1.85) (1.09) (1.41) (1.39)
Portfolio turnover rate(%)................... 93 56 21 36 62 32 2
Average commission rate...................... $ .0170 $ .0134 N/A N/A N/A N/A N/A
<CAPTION>
CLASS A
----------------------------------------------
1991(C) 1990(D) 1989(D) 1988(E)
SELECTED PER SHARE DATA ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 8.55 $10.53 $10.15 $ 9.50
------- ------- ------- ------
Income (loss) from investment operations
Net investment income (loss).............. (.03) .02 .15(g) .17(g)
Net realized and unrealized gain (loss) on
investment transactions.................. .41 (1.98) .50 .57
------- ------- ------- ------
Total from investment operations....... .38 (1.96) .65 .74
------- ------- ------- ------
Less distributions
From net investment income................ -- .02 .24 .07
In excess of net investment income........ -- -- -- --
From net realized gain.................... .04 -- .03 .02
In excess of net realized gain............ -- -- -- --
From capital paid-in...................... -- -- -- --
------- ------- ------- ------
Total distributions...................... .04 .02 .27 .09
------- ------- ------- ------
Net asset value, end of period............... $ 8.89 $ 8.55 $10.53 $10.15
======= ======= ======= ======
Total return(%).............................. 6.59 (18.69) 6.41 8.15
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $14,369 $14,268 $16,807 $5,360
Ratio of expenses to average net assets(%)
With expense reimbursement(%)............. -- -- 2.36 1.91
Without expense reimbursement(%).......... 2.78 2.89 3.14 5.05
Ratio of net investment income (loss) to
average net assets(%)....................... (.52) .16 1.57(g) 1.86(g)
Portfolio turnover rate(%)................... 4 -- 2 3
Average commission rate...................... N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------- --------------------
1997 1996 1995 1994(A) 1994(F) 1997 1996(H)
SELECTED PER SHARE DATA -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 9.59 $ 9.21 $ 8.90 $ 9.85 $10.16 $ 9.62 $10.67
------- ------- ------- ------- ------- ------- ------
Income (loss) from investment
operations
Net investment loss........... (.24) (.17) (.20)(g) (.09) (.02) (.24) (.14)
Net realized and unrealized
gain (loss) on investment
transactions................. (2.18) 2.19 .71 (.86) (.29) (2.18) .72
------- ------- ------- ------- ------- ------- ------
Total from investment
operations................ (2.42) 2.02 .51 (.95) (.31) (2.42) .58
------- ------- ------- ------- ------- ------- ------
Less distributions
In excess of net investment
income....................... .13 -- -- -- -- .13 --
From net realized gain........ .44 1.64 .20 -- -- .44 1.63
In excess of net realized
gain......................... 1.14 -- -- -- -- 1.14 --
------- ------- ------- ------- ------- ------- ------
Total distributions........ 1.71 1.64 .20 -- -- 1.71 1.63
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period... $ 5.46 $ 9.59 $ 9.21 $ 8.90 $ 9.85 $ 5.49 $ 9.62
======= ======= ======= ======= ======= ======= ======
Total return(%).................. (24.03) 23.26 5.74 (9.64) (3.05) (23.95) 6.51
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)...................... $ 1,501 $ 2,040 $ 1,142 $ 741 $ 227 $ 349 $ 173
Ratio of expenses to average net
assets
With expense
reimbursement(%)............. -- -- 3.50 -- -- -- --
Without expense
reimbursement(%)............. 3.23 3.30 3.83 3.03 2.68 3.14 3.15
Ratio of net investment loss to
average net assets(%)........... (2.45) (2.30) (2.73)(g) (2.44) (1.72) (2.37) (2.15)
Portfolio turnover rate(%)....... 93 56 21 36 62 93 56
Average commission rate.......... $ .0170 $ .0134 N/A N/A N/A $.0170 $.0134
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) For the six months ended December 31, 1994.
(b) For the year ended June 30.
(c) For the eight months ended June 30, 1991.
(d) For the year ended October 31.
(e) From November 18, 1987 (commencement) to October 31, 1988.
(f) From April 1, 1994 (commencement) to June 30, 1994.
(g) Net investment income (loss) is net of expenses reimbursed
by manager.
(h) From April 30, 1996 (commencement) to December 31, 1996.
</TABLE>
7
<PAGE> 48
IVY CHINA REGION FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
1997 1996 1995 1994 1993(A)
SELECTED PER SHARE DATA -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.30 $ 8.58 $ 8.61 $11.55 $10.00
------- ------- ------- ------- ------
Income (loss) from investment operations
Net investment income (loss)(c)........... .02(d) .03 .14 .05 (.01)
Net realized and unrealized gain (loss) on
investment transactions.................. (2.28)(d) 1.74 (.01) (2.91) 1.57
------- ------- ------- ------- ------
Total from investment operations....... (2.26) 1.77 .13 (2.86) 1.56
------- ------- ------- ------- ------
Less distributions
From net investment income................ -- .03 .14 .05 >--
In excess of net investment income........ -- .02 -- .03 --
In excess of net realized gain............ -- -- .02 -- --
From capital paid-in...................... -- -- -- -- .01
------- ------- ------- ------- ------
Total distributions.................... -- .05 .16 .08 .01
------- ------- ------- ------- ------
Net asset value, end of period............... $ 8.04 $ 10.30 $ 8.58 $ 8.61 $11.55
======= ======= ======= ======= ======
Total return(%).............................. (21.94) 20.50 1.59 (24.88) 15.65
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $12,020 $15,290 $12,855 $13,180 $8,371
Ratio of expenses to average net assets(e)
With expense reimbursement(%)................ 2.44 2.20 2.20 2.20 1.98
Without expense reimbursement (%)............ 2.51 2.48 2.73 2.76 2.45
Ratio of net investment income (loss) to
average net assets (%)(c)................... .28 .32 1.61 .55 (.91)
Portfolio turnover rate(%)................... 20 22 25 4 --
Average commission rate...................... $ .0050 $ .0050 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------- --------------------
1997 1996 1995 1994 1993(A) 1997 1996(B)
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 10.28 $ 8.58 $ 8.61 $ 11.55 $10.00 $ 10.24 $ 9.44
------- ------- ------- ------- ------- ------- ------
Income (loss) from investment
operations
Net investment income
(loss)(c)...................... (.04)(d) (.04) .08 (.02) (.02) (.03)(d) --
Net realized and unrealized gain
(loss) on investment
transactions................... (2.28)(d) 1.74 (.02) (2.92) 1.57 (2.27)(d) .89
------- ------- ------- ------- ------- ------- ------
Total from investment
operations.................. (2.32) 1.70 .06 (2.94) 1.55 (2.30) .89
------- ------- ------- ------- ------- ------- ------
Less distributions
From net investment income...... -- -- .08 -- -- -- --
In excess of net investment
income......................... -- -- -- -- -- -- .09
In excess of net realized
gain........................... -- -- .01 -- -- -- --
------- ------- ------- ------- ------- ------- ------
Total distributions.......... -- -- .09 -- -- -- .09
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period..... $ 7.96 $ 10.28 $ 8.58 $ 8.61 $11.55 $ 7.94 $10.24
======= ======= ======= ======= ======= ======= ======
Total return(%).................... (22.57) 19.67 .83 (25.45) 15.50 (22.46) 9.39
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $ 7,893 $ 8,995 $ 6,905 $ 7,336 $3,565 $ 1,129 $ 449
Ratio of expenses to average net
assets(e)
With expense reimbursement...... 3.17 2.95 2.95 2.95 2.74 3.05 2.71
Without expense reimbursement... 3.24 3.23 3.48 3.51 3.20 3.12 2.99
Ratio of net investment income
(loss) to average net
assets(%)(c)...................... (.45) (.43) .86 (.20) (1.66) (.33) (.19)
Portfolio turnover rate(%)......... 20 22 25 4 -- 20 22
Average commission rate............ $ .0050 $ .0050 N/A N/A N/A $ .0050 $.0050
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) From October 23, 1993 (commencement) to December 31, 1993.
(b) From April 30, 1996 (commencement) to December 31, 1996.
(c) Net investment income (loss) is net of expenses reimbursed
by manager.
(d) Based on average shares outstanding.
(e) Beginning in 1995, total expenses include fees paid
indirectly, if any, through an expense offset arrangement.
</TABLE>
8
<PAGE> 49
IVY DEVELOPING NATIONS FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------- -------------------
1997 1996 1995 1994(A) 1997 1996
SELECTED PER SHARE DATA ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $10.12 $ 9.05 $ 8.64 $10.00 $10.04 $ 9.05
------- ------- ------ ------- ------- ------
Income (loss) from investment
operations
Net investment income
(loss)(c)..................... .01 (.02) .01 -- (.06) (.06)
Net realized and unrealized
gain (loss) on investment
transactions.................. (2.80) 1.09 .54 (1.36) (2.76) 1.05
------- ------- ------ ------- ------- ------
Total from investment
operations................. (2.79) 1.07 .55 (1.36) (2.82) .99
------- ------- ------ ------- ------- ------
Less distributions
From net investment income..... -- -- .01 -- -- --
In excess of net investment
income........................ .01 -- -- -- .01 --
From net realized gain......... .30 -- .10 -- .28 --
In excess of net realized
gain.......................... .20 -- .03 -- .16 --
------- ------- ------ ------- ------- ------
Total distributions......... .51 -- .14 -- .45 --
------- ------- ------ ------- ------- ------
Net asset value, end of period.... $ 6.82 $ 10.12 $ 9.05 $ 8.64 $ 6.77 $10.04
======= ======= ====== ======= ======= ======
Total return(%)................... (27.42) 11.83 6.40 (13.50) (27.93) 10.95
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)....................... $8,584 $ 9,925 $3,435 $ 611 $8,488 $6,269
Ratio of expenses to average net
assets(d)
With expense reimbursement(%).... 2.31 2.45 2.55 2.20 3.09 3.20
Without expense
reimbursement(%)............... 2.39 2.82 7.18 20.74 3.17 3.57
Ratio of net investment income
(loss) to average net
assets(%)(c)..................... .09 (.23) .24 .52 (.69) (.98)
Portfolio turnover rate(%)........ 42 27 14 -- 42 27
Average commission rate........... $.0020 $ .0018 N/A N/A $.0020 $.0018
<CAPTION>
CLASS B CLASS C
------------------- ------------------
1995 1994(A) 1997 1996(B)
SELECTED PER SHARE DATA ------ ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 8.64 $10.00 $10.06 $ 9.89
------ ------ ------ ------
Income (loss) from investment
operations
Net investment income
(loss)(c).................. (.02) -- (.07) (.02)
Net realized and unrealized
gain (loss) on investment
transactions............... .51 (1.36) (2.76) .19
------ ------ ------ ------
Total from investment
operations.............. .49 (1.36) (2.83) .17
------ ------ ------ ------
Less distributions
From net investment income.. -- -- -- --
In excess of net investment
income..................... -- -- .01 --
From net realized gain...... .08 -- .27 --
In excess of net realized
gain....................... -- -- .16 --
------ ------ ------ ------
Total distributions...... .08 -- .44 --
------ ------ ------ ------
Net asset value, end of period. $ 9.05 $ 8.64 $ 6.79 $10.06
====== ====== ====== ======
Total return(%)................ 5.62 (13.60) (28.01) 1.73
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).................... $ 945 $ 121 $2,420 $1,854
Ratio of expenses to average ne
assets(d)
With expense reimbursement(%). 3.30 2.95 3.12 3.16
Without expense
reimbursement(%)............ 7.93 21.49 3.20 3.53
Ratio of net investment income
(loss) to average net
assets(%)(c).................. (.51) (.23) (.72) (.94)
Portfolio turnover rate(%)..... 14 -- 42 27
Average commission rate........ N/A N/A $.0020 $.0018
</TABLE>
- ---------------
(a) From November 1, 1994 (commencement) to December 31, 1994.
(b) From April 30, 1996 (commencement) to December 31, 1996.
(c) Net investment income (loss) is net of expenses reimbursed by manager.
(d) Beginning in 1995, total expenses include any fees paid indirectly through
an expense offset arrangement.
9
<PAGE> 50
IVY GLOBAL FUND(A)
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
1997 1996 1995 1994(B) 1994(C) 1993(C)
SELECTED PER SHARE DATA ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $ 10.55
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment income (loss)......... .08 .08 .09(g) --(g) --(g) .03(g)
Net realized and unrealized gain
(loss)
on investment transactions........... (1.23) 1.86 1.25 (.10) 1.79 .44
------- ------- ------- ------- ------- -------
Total from investment
operations....................... (1.15) 1.94 1.34 (.10) 1.79 .47
------- ------- ------- ------- ------- -------
Less distributions
From net investment income........... .05 .08 .04 -- .01 .03
In excess of net investment income... .26 .18 -- -- -- --
From net realized gain............... .78 .48 .49 .09 .88 .37
In excess of net realized gain....... -- -- .07 -- -- --
From capital paid-in................. -- -- -- .10 -- --
------- ------- ------- ------- ------- -------
Total distributions............... 1.09 .74 .60 .19 .89 .40
------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62
======= ======= ======= ======= ======= =======
Total return(%)......................... (8.72) 16.21 12.08 (1.00) 16.71 4.54
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (in
thousands)............................. $19,692 $24,152 $21,264 $19,327 $17,393 $12,391
Ratio of expenses to average net assets
With expense reimbursement(%) -- -- 2.20 2.20 2.20 1.95
Without expense reimbursement(%)....... 2.07 2.18 2.46 2.34 2.42 2.76
Ratio of net investment income (loss) to
average net assets(%).................. .58 .58 .71(g) (.06)(g) .01(g) .38(g)
Portfolio turnover rate(%).............. 45 43 53 23 85 67
Average commission rate................. $ .0100 $ .0181 N/A N/A N/A N/A
<CAPTION>
CLASS A
----------------------
1992(C) 1991(D)
SELECTED PER SHARE DATA -------- --------
<S> <C> <C>
Net asset value, beginning of period.... $ 9.40 $10.00
------ ------
Income (loss) from investment
operations
Net investment income (loss)......... .06(g) .02(g)
Net realized and unrealized gain
(loss)
on investment transactions........... 1.79 (.61)
------ ------
Total from investment
operations....................... 1.85 (.59)
------ ------
Less distributions
From net investment income........... .06 .01
In excess of net investment income... -- --
From net realized gain............... .62 --
In excess of net realized gain....... -- --
From capital paid-in................. .02 --
------ ------
Total distributions............... .70 .01
------ ------
Net asset value, end of period.......... $10.55 $ 9.40
====== ======
Total return(%)......................... 19.91 (24.65)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (in
thousands)............................. $8,780 $1,667
Ratio of expenses to average net assets
With expense reimbursement(%) 2.02 2.50
Without expense reimbursement(%)....... 2.97 11.70
Ratio of net investment income (loss) to
average net assets(%).................. .82(g) .81(g)
Portfolio turnover rate(%).............. 59 24
Average commission rate................. N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------- ----------------------
1997 1996 1995 1994(B) 1994(E) 1997 1996(F)
SELECTED PER SHARE DATA ------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 13.12 $ 11.97 $ 11.23 $ 11.52 $ 12.12 $ 12.94 $ 13.31
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment loss............. (.02) (.02) --(g) (.03)(g) (.01)(g) (.02) (.01)
Net realized and unrealized gain
(loss) on investment
transactions................... (1.20) 1.85 1.25 (.12) (.04) (1.24) .42
------- ------- ------- ------- ------- ------- -------
Total from investment
operations.................. (1.22) 1.83 1.25 (.15) (.05) (1.26) .41
------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income...... .05 -- -- -- -- .05 --
In excess of net investment
income......................... .26 .20 -- -- -- .26 .30
From net realized gain.......... .69 .48 .45 .08 .55 .70 .48
In excess of net realized
gain........................... -- -- .06 -- -- -- --
From capital paid-in............ -- -- -- .06 -- -- --
------- ------- ------- ------- ------- ------- -------
Total distributions.......... 1.00 .68 .51 .14 .55 1.01 .78
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period..... $ 10.90 $ 13.12 $ 11.97 $ 11.23 $ 11.52 $ 10.67 $ 12.94
======= ======= ======= ======= ======= ======= =======
Total return(%).................... (9.33) 15.30 11.25 (1.37) .38 (9.72) 3.07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $10,056 $ 8,968 $ 4,811 2,956 $ 376 $ 727 $ 71
Ratio of expenses to average net
assets
With expense reimbursement(%)..... -- -- 2.95 2.95 2.95 -- --
Without expense
reimbursement(%)................ 2.82 2.94 3.21 3.09 3.17 2.82 3.77
Ratio of net investment loss to
average net assets(%)............. (.18) (.17) (.04)(g) (.81)(g) (.74)(g) (.18) (1.01)
Portfolio turnover rate(%)......... 45 43 53 23 85 45 43
Average commission rate............ $ .0100 $ .0181 N/A N/A N/A $ .0100 $ .0181
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Since February 1, 1995, Ivy Global Fund's adviser has been
IMI. Prior to February 1, 1995, Ivy Global Fund's adviser
was MIMI.
(b) For the six months ended December 31, 1994.
(c) For the year ended June 30.
(d) From April 18, 1991 (commencement) to June 30, 1991.
(e) From April 1, 1994 (commencement) to June 30, 1994.
(f) From April 30, 1996 (commencement) to December 31, 1996.
(g) Net investment income (loss) is net of expenses reimbursed
by manager.
</TABLE>
10
<PAGE> 51
IVY GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
1997(A) 1997(A) 1997(A)
SELECTED PER SHARE DATA ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.... $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment loss(b)............... (.11) (.15) (.17)
Net realized and unrealized gain on
investment transactions............. .70 .68 .68
------ ------ ------
Total from investment
operations........................ .59 .53 .51
------ ------ ------
Less distributions
In excess of net investment income... .22 .17 .15
From net realized gain............... 1.08 1.08 1.08
In excess of net realized gain....... .28 .28 .28
------ ------ ------
Total distributions............... 1.58 1.53 1.51
------ ------ ------
Net asset value, end of period.......... $ 9.01 $ 9.00 $ 9.00
====== ====== ======
Total return(%)......................... 6.95 6.28 6.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $3,907 $2,706 $ 124
Ratio of expenses to average net assets
With expense reimbursement(%).......... 2.10 2.86 3.08
Without expense reimbursement(%)....... 2.88 3.64 3.86
Ratio of net investment loss to average
net assets (%)(b)...................... (1.10) (1.86) (2.08)
Portfolio turnover rate(%).............. 199 199 199
Average commission rate................. $.0190 $.0190 $.0190
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) The Fund commenced operations on January 1, 1997.
(b) Net investment loss is net of expenses reimbursed by
manager.
</TABLE>
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------- -------------------- --------------------
1997 1996(A) 1997 1996(A) 1997 1996(A)
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $16.40 $10.00 $16.44 $10.00 $16.46 $10.00
------- ------ ------ ------ ------ ------
Income from investment operations
Net investment loss.................. (.31) (.06)(b) (.32) (.06)(b) (.42) (.05)(b)
Net realized and unrealized gain on
investments......................... 1.38 6.49 1.25 6.52 1.36 6.53
------- ------ ------ ------ ------ ------
Total from investment
operations....................... 1.07 6.43 .93 6.46 .94 6.48
------- ------ ------ ------ ------ ------
Less distributions
From net realized gain............... -- .03 -- .02 -- .02
------- ------ ------ ------ ------ ------
Total distributions............... -- .03 -- .02 -- .02
------- ------ ------ ------ ------ ------
Net asset value, end of period.......... $17.47 $16.40 $17.37 $16.44 $17.40 $16.46
======= ====== ====== ====== ====== ======
Total return (%)........................ 6.53 64.34 5.66 64.59 5.71 64.84
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $12,159 $8,324 $8,577 $3,425 $6,348 $2,106
Ratio of expenses to average net assets
With expense reimbursement(%).......... -- 2.19 -- 2.99 -- 2.95
Without expense reimbursement(%)....... 2.11 2.90 2.92 3.70 2.85 3.66
Ratio of net investment loss to average
net assets (%)......................... (1.91) (2.18)(b) (2.72) (2.98)(b) (2.65) (2.94)(b)
Portfolio turnover rate(%).............. 54 23 54 23 54 23
Average commission rate................. $.0600 $.0600 $.0600 $.0600 $.0600 $.0600
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) From July 22, 1996 (commencement) to December 31, 1996.
(b) Net investment loss is net of expenses reimbursed by
manager.
</TABLE>
11
<PAGE> 52
IVY INTERNATIONAL FUND(A)
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88 $ 19.37
---------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income............................ .24 .20 .25 .07 .12 .27(e)
Net realized and unrealized gain (loss) on
investment transactions......................... 3.47 5.85 3.22 1.01 9.01 (.26)
---------- -------- -------- -------- -------- --------
Total from investment operations.............. 3.71 6.05 3.47 1.08 9.13 .01
---------- -------- -------- -------- -------- --------
Less distributions
From net investment income....................... .21 .19 .25 .07 .08 .27
From net realized gain........................... .26 .64 .12 1.11 .22 .23
In excess of net realized gain................... .10 -- .03 -- -- --
From capital paid-in............................. -- -- -- .01 -- --
---------- -------- -------- -------- -------- --------
Total distributions.............................. .57 .83 .40 1.19 .30 .50
---------- -------- -------- -------- -------- --------
Net asset value, end of period...................... $ 39.03 $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88
========== ======== ======== ======== ======== ========
Total return(%)..................................... 10.38 19.72 12.65 3.92 48.37 .07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $1,705,772 $989,254 $475,989 $229,586 $172,539 $109,637
Ratio of expenses to average net assets(%).......... 1.59 1.65 1.52 1.58 1.61 1.71(f)
Ratio of net investment income to average net assets
(%)................................................ .68 .76 .97 .30 .56 1.36(e)
Portfolio turnover rate(%).......................... 8 14 6 7 19 20
Average commission rate............................. $ .0090 $ .0092 N/A N/A N/A N/A
<CAPTION>
CLASS A
----------------------------------------
1991 1990 1989 1988
SELECTED PER SHARE DATA ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 16.98 $ 20.31 $ 16.62 $ 12.90
------- ------- ------- -------
Income from investment operations
Net investment income............................ .26 .50 .27 .12
Net realized and unrealized gain (loss) on
investment transactions......................... 2.61 (3.13) 4.43 3.71
------- ------- ------- -------
Total from investment operations.............. 2.87 (2.63) 4.70 3.83
------- ------- ------- -------
Less distributions
From net investment income....................... .26 .51 .17 .11
From net realized gain........................... .22 .19 .84 --
In excess of net realized gain................... -- -- -- --
From capital paid-in............................. -- -- -- --
------- ------- ------- -------
Total distributions.............................. .48 .70 1.01 .11
------- ------- ------- -------
Net asset value, end of period...................... $ 19.37 $ 16.98 $ 20.31 $ 16.62
======= ======= ======= =======
Total return(%)..................................... 16.93 (12.97) 28.26 29.72
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $97,486 $64,651 $58,469 $23,637
Ratio of expenses to average net assets(%).......... 1.64 1.66 1.80 1.93
Ratio of net investment income to average net assets
(%)................................................ 1.50 2.50 1.20 .80
Portfolio turnover rate(%).......................... 27 29 23 45
Average commission rate............................. N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- ---------------------
1997 1996 1995 1994 1993(B) 1997 1996(D)
SELECTED PER SHARE DATA -------- -------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 35.73 $ 30.67 $ 27.60 $ 27.71 $25.86 $ 35.58 $ 32.68
-------- -------- ------- ------- ------ -------- -------
Income from investment operations
Net investment income (loss)......... (.06) (.01) .01 (.10) (.01) (.05) --
Net realized and unrealized gain
(loss) on investment transactions... 3.44 5.76 3.20 .91 2.12 3.42 3.74
-------- -------- ------- ------- ------ -------- -------
Total from investment
operations....................... 3.38 5.75 3.21 .81 2.11 3.37 3.74
-------- -------- ------- ------- ------ -------- -------
Less distributions
From net investment income........... -- -- .01 -- .04 .01 --
In excess of net investment income... -- .05 -- -- -- -- .20
From net realized gain............... .21 .64 .10 .90 .22 .21 .64
In excess of net realized gain....... .08 -- .03 -- -- .09 --
From capital paid-in................. -- -- -- .02 -- -- --
-------- -------- ------- ------- ------ -------- -------
Total distributions.................. .29 .69 .14 .92 .26 .31 .84
-------- -------- ------- ------- ------ -------- -------
Net asset value, end of period.......... $ 38.82 $ 35.73 $ 30.67 $ 27.60 $27.71 $ 38.64 $ 35.58
======== ======== ======= ======= ====== ======== =======
Total return(%)......................... 9.46 18.76 11.62 2.96 7.65 9.50 11.45
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $568,521 $312,161 $74,650 $30,143 $2,846 $174,880 $44,450
Ratio of expenses to average net
assets(%).............................. 2.42 2.45 2.44 2.50 2.59 2.41 2.44
Ratio of net investment income (loss) to
average net assets(%).................. (.15) (.04) .05 (.62) (.42) (.14) (.03)
Portfolio turnover rate(%).............. 8 14 6 7 19 8 14
Average commission rate................. $ .0090 $ .0092 N/A N/A N/A $ .0090 $ .0092
<CAPTION>
CLASS I
-----------------------------------------
1997 1996 1995 1994(C)
SELECTED PER SHARE DATA -------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 35.89 $30.67 $ 27.60 $29.06
-------- ------- ------- ------
Income from investment operations
Net investment income (loss)......... .32 .27 .30 .03
Net realized and unrealized gain
(loss) on investment transactions... 3.56 5.88 3.22 (.49)
-------- ------- ------- ------
Total from investment
operations....................... 3.88 6.15 3.52 (.46)
-------- ------- ------- ------
Less distributions
From net investment income........... .32 .27 .30 .03
In excess of net investment income... -- .02 -- --
From net realized gain............... .28 .64 .12 .92
In excess of net realized gain....... .11 -- .03 --
From capital paid-in................. -- -- -- .05
-------- ------- ------- ------
Total distributions.................. .71 .93 .45 1.00
-------- ------- ------- ------
Net asset value, end of period.......... $ 39.06 $35.89 $ 30.67 $27.60
======== ======= ======= ======
Total return(%)......................... 10.87 20.06 12.85 (1.64)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $115,046 $53,344 $13,020 $4,921
Ratio of expenses to average net
assets(%).............................. 1.18 1.25 1.35 1.41
Ratio of net investment income (loss) to
average net assets(%).................. 1.08 1.16 1.14 .47
Portfolio turnover rate(%).............. 8 14 6 7
Average commission rate................. $ .0090 $.0092 N/A N/A
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Effective April 1, 1993, the subadviser is Northern Cross
Investments Limited. In prior periods Ivy International Fund
had the following subadvisors: Boston Overseas Investors,
Inc. from July 1, 1990 through March 31, 1993; and Marsh &
Cunningham, from November 15, 1985 through June 30, 1990.
(b) From October 23, 1993 (commencement) to December 31, 1993.
(c) From October 6, 1994 (commencement) to December 31, 1994.
(d) From April 30, 1996 (commencement) to December 31, 1996.
(e) Net investment income is net of expenses reimbursed by IMI.
(f) The ratio of expenses to average net assets is net of
expenses reimbursed by IMI. Without reimbursement, the ratio
of expenses to average net assets would have been 1.80%.
</TABLE>
12
<PAGE> 53
IVY INTERNATIONAL FUND II
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
1997(B) 1997(B) 1997(B)
SELECTED PER SHARE DATA(A) ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......... $10.01 $10.01 $ 10.01
------- ------- -------
Loss from investment operations
Net investment income (loss)(c)............. -- (.02) (.02)
Net realized and unrealized loss on
investment transactions................... (1.03) (1.06) (1.06)
------- ------- -------
Total from investment operations...... (1.03) (1.08) (1.08)
------- ------- -------
Net asset value, end of period............... $ 8.98 $ 8.93 $ 8.93
======= ======= =======
Total return(%).............................. (10.29) (10.79) (10.79)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $16,202 $53,652 $27,074
Ratio of expenses to average net assets(%)
With expense reimbursement(%)............... 1.80 2.63 2.63
Without expense reimbursement(%)............ 2.11 2.94 2.94
Ratio of net investment income (loss) to
average net assets(%)(c).................... .12 (.71) (.71)
Portfolio turnover rate(%)................... 10 10 10
Average commission rate...................... $.0250 $.0250 $ .0250
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Based on average shares outstanding
For the period May 13, 1997 (commencement of operations) to
(b) December 31, 1997.
Net investment income (loss) is net of expenses reimbursed
(c) by manager.
</TABLE>
IVY INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
1997(A) 1997(A) 1997(A)
SELECTED PER SHARE DATA ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.... $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment loss(b)............... (.01) (.05) (.06)
Net realized and unrealized loss on
investment transactions............ (1.24) (1.27) (1.25)
------ ------ ------
Total from investment
operations....................... (1.25) (1.32) (1.31)
------ ------ ------
Less distributions
From net realized gain............... .09 .05 .04
------ ------ ------
Total distributions.............. .09 .05 .04
------ ------ ------
Net asset value, end of period.......... $ 8.66 $ 8.63 $ 8.65
====== ====== ======
Total return(%)......................... (12.52) (13.19) (13.14)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $ 992 $1,007 $1,574
Ratio of expenses to average net
assets(c)
With expense reimbursement(%).......... 2.50 3.31 3.23
Without expense reimbursement(%)....... 4.87 5.68 5.60
Ratio of net investment loss to average
net assets(%)(b)....................... (.11) (.91) (.83)
Portfolio turnover rate(%).............. 10 10 10
Average commission rate................. $.0030 $.0030 $.0030
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) The Fund commenced operations January 1, 1997.
Net investment loss is net of expenses reimbursed by
(b) manager.
Total expenses include fees paid indirectly through an
(c) expense offset arrangement.
</TABLE>
13
<PAGE> 54
IVY PAN-EUROPE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
1997(A) 1997(A)
SELECTED PER SHARE DATA ------- -------
<S> <C> <C>
Net asset value, beginning of period......... $10.02 $10.02
------ ------
Income from investment operations
Net investment loss(b).................... (.02) (.03)
Net realized and unrealized gain on
investment transactions.................. .58 .56
------ ------
Total from investment operations....... .56 .53
------ ------
Less distributions
From net realized gain.................... .02 .01
------ ------
Total distributions.................... .02 .01
------ ------
Net asset value, end of period............... $10.56 $10.54
====== ======
Total return(%).............................. 5.54 5.26
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $ 575 $ 70
Ratio of expenses to average net assets
With expense reimbursement(%)............... 2.20 3.29
Without expense reimbursement(%)............ 28.41 29.50
Ratio of net investment loss to average net
assets(%)(b)................................ (.48) (1.58)
Portfolio turnover rate(%)................... 5 5
Average commission rate...................... $.0300 $.0300
</TABLE>
- ---------------
(a) For the period May 13, 1997 (commencement of operations) to December 31,
1997.
(b) Net investment loss is net of expenses reimbursed by manager.
IVY SOUTH AMERICA FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------------- ------------------
1997 1996 1995 1994(A) 1997 1996
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 8.51 $ 6.88 $ 8.37 $10.00 $ 8.48 $ 6.88
------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (loss)(c)........... .06 .01 .01 -- (.01) (.03)
Net realized and unrealized gain (loss) on
investment transactions.................. .53 1.66 (1.45) (1.63) .53 1.63
------- ------- ------- ------- ------- -------
Total from investment operations....... .59 1.67 (1.44) (1.63) .52 1.60
------- ------- ------- ------- ------- -------
Less distributions
From net investment income................ .04 -- -- -- -- --
From net realized gain.................... .10 .04 -- -- .06 --
From capital paid-in...................... -- -- .05 -- -- --
------- ------- ------- ------- ------- -------
Total distributions.................... .14 .04 .05 -- .06 --
------- ------- ------- ------- ------- -------
Net asset value, end of period............... $ 8.96 $ 8.51 $ 6.88 $ 8.37 $ 8.94 $ 8.48
======= ======= ======= ======= ======= =======
Total return(%).............................. 7.03 24.22 (17.28) (16.10) 6.18 23.26
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $5,671 $4,016 $2,015 $ 571 $3,028 $2,025
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............... 2.45 2.55 2.61 2.20 3.23 3.33
Without expense reimbursement(%)............ 3.18 4.89 9.26 16.22 3.96 5.67
Ratio of net investment income (loss) to
average net assets(%)(c).................... .65 .24 .22 .21 (.13) (.54)
Portfolio turnover rate(%)................... 10 20 45 82 10 20
Average commission rate...................... $.0002 $.0002 N/A N/A $.0002 $.0002
<CAPTION>
CLASS B CLASS C
------------------ ------------------
1995 1994(A) 1997 1996(B)
SELECTED PER SHARE DATA ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 8.37 $10.00 $ 8.46 $ 7.96
------- ------- ------- ------
Income (loss) from investment operations
Net investment income (loss)(c)........... (.02) (.01) (.02) (.02)
Net realized and unrealized gain (loss) on
investment transactions.................. (1.47) (1.62) .53 .55
------- ------- ------- ------
Total from investment operations....... (1.49) (1.63) .51 .53
------- ------- ------- ------
Less distributions
From net investment income................ -- -- -- --
From net realized gain.................... -- -- .08 .03
From capital paid-in...................... -- -- -- --
------- ------- ------- ------
Total distributions.................... -- -- .08 .03
------- ------- ------- ------
Net asset value, end of period............... $ 6.88 $ 8.37 $ 8.89 $ 8.46
======= ======= ======= ======
Total return(%).............................. (17.90) (16.20) 6.06 6.66
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $ 684 $ 122 $ 453 $ 111
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............... 3.36 2.95 3.30 3.46
Without expense reimbursement(%)............ 10.01 16.97 4.03 5.80
Ratio of net investment income (loss) to
average net assets(%)(c).................... (.53) (.54) (.20) (.68)
Portfolio turnover rate(%)................... 45 82 10 20
Average commission rate...................... N/A N/A $.0002 $.0002
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) From November 1, 1994 (commencement of operations) to
December 31, 1994.
(b) From April 30, 1996 (commencement) to December 31, 1996.
(c) Net investment income (loss) is net of expenses reimbursed
by manager.
(d) Beginning in 1995, total expenses include any fees paid
indirectly through an expense offset arrangement.
</TABLE>
14
<PAGE> 55
INVESTMENT OBJECTIVE AND POLICIES
Each Fund has its own investment objective and policies, which are described
below. Each Fund's investment objective is fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for a Fund's investment objective and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental, and may be
changed by the Board of Trustees of the Trust ("Trustees") without shareholder
approval. There can be no assurance that a Fund's objective will be met. The
different types of securities and investment techniques used by the Funds
involve varying degrees of risk. For information about the particular risks
associated with each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction of a Fund described
in this Prospectus or in the SAI states a maximum percentage of assets that may
be invested in a security or other asset or describes a policy regarding quality
standards, that percentage limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes place. Thus,
for example, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage that results from circumstances
not involving any affirmative action by the Fund will not be considered a
violation.
IVY ASIA PACIFIC FUND: The Fund's principal investment objective is long-
term growth. Consideration of current income is secondary to this principal
objective. Under normal circumstances the Fund invests at least 65% of its total
assets in securities issued in Asia-Pacific countries, which for purposes of
this Prospectus are defined to include China, Hong Kong, India, Indonesia,
Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, South Korea, Taiwan,
Thailand and Vietnam. Securities of Asia-Pacific issuers include: (a) securities
of companies organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific region; (b)
securities that are issued or guaranteed by the government of an Asia-Pacific
country, its agencies or instrumentalities, political subdivisions or the
country's central bank; (c) securities of a company, wherever organized, where
at least 50% of the company's non-current assets, capitalization, gross revenue
or profit in any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in the
Asia-Pacific region; and (d) any of the preceding types of securities in the
form of depository shares.
The Fund may participate in markets throughout the Asia-Pacific region, and
it is expected that the Fund will be invested at all times in at least three
Asia-Pacific countries. The Fund does not expect to concentrate its investments
in any particular industry. See Appendix C to the SAI for further information
about the economic characteristics of certain Asia-Pacific countries.
The Fund may invest up to 35% of its assets in investment-grade debt
securities of government or corporate issuers in emerging market countries,
equity securities and investment grade debt securities of issuers in developed
countries (including the United States), warrants, and cash or cash equivalents,
such as bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limit in such
instruments. The Fund may also invest up to 5% of its net assets in zero coupon
bonds, and in debt securities rated Ba or below by Moody's Investor Service,
Inc. ("Moody's") or BB or below by Standard and Poor's Corporation ("S&P"), or
if unrated, are considered by IMI to be of comparable quality (commonly referred
to as "high yield" or "junk" bonds). The Fund will not invest in debt securities
rated less than C by either Moody's or S&P. As of December 31, 1997, the Fund
held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts. The Fund may
also invest up to 10% of its total assets in other investment companies that
invest in securities issued in Asia-Pacific countries, and up to 15% of its net
assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets are subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index and foreign currency futures contracts, provided
that the Fund's equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY CANADA FUND: Ivy Canada Fund seeks long-term capital appreciation by
investing primarily in equity securities of Canadian companies. Canada is one of
the world's leading industrial countries and a major exporter of agricultural
products. The country is rich in natural resources such as zinc, uranium,
nickel, gold, silver, aluminum, iron and copper, and forest covers over 44% of
land areas, making Canada a leading world producer of newsprint. Canada is also
a major producer of hydroelectricity, oil and gas.
As a fundamental policy, the Fund normally invests at least 65% of its total
assets in Canadian equity securities (i.e., common and preferred stock,
securities convertible into common stock and common stock purchase warrants)
listed on Canadian stock exchanges or traded over-the-counter in Canada.
Canadian issuers are companies (i) organized under the laws of Canada, (ii) for
which the principal securities trading market is in Canada, (iii) which derive
at least 50% of their revenues or profits from goods produced or sold,
investments made or services performed in Canada, or (iv) which have at least
50% of their assets situated in Canada. The balance of the Fund's assets
ordinarily are invested in (i) bills and bonds of the Canadian Government and
the governments of the provinces or municipalities of Canada, (ii) high quality
notes and debentures of Canadian companies (i.e., those rated Aaa or Aa by
Moody's or AAA or AA by S&P, or if unrated, judged to be of comparable quality
by Mackenzie Financial Corporation ("MFC"), the Fund's Advisor), (iii) foreign
securities (including sponsored or unsponsored American Depository Receipts
("ADRs"), Global Depository Receipts ("GDRs"), American Depository Shares
("ADSs") and Global Depository Shares ("GDSs")), (iv) U.S. Government
securities, (v) equity securities and investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by MFC to be of comparable quality) of U.S. companies, and (vi) zero
coupon bonds that meet these credit quality standards.
The Fund may purchase securities on a "when-issued" or firm commitment
basis, engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies and up to 15% of its net assets in illiquid
securities. The fund may not, as a matter of fundamental policy, invest more
than 5% of its total assets in restricted securities.
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<PAGE> 56
For temporary defensive purposes, the Fund may invest without limit in U.S.
or Canadian dollar-denominated money market securities issued by entities
organized in the U.S. or Canada, such as (i) obligations issued or guaranteed by
the Canadian Government or the governments of the provinces or municipalities of
Canada (or their agencies or instrumentalities), (ii) finance company and
corporate commercial paper (and other short-term corporate obligations rated
Prime-1 by Moody's or A or better by S&P, or if unrated, considered by MFC to be
of comparable quality), (iii) obligations of banks (i.e., certificates of
deposit, time deposits and bankers' acceptances) considered creditworthy by MFC
under guidelines approved by the Trustees, and (iv) repurchase agreements with
broker-dealers and banks. For temporary or emergency purposes, the Fund may also
borrow up to 10% of the value of its total assets from banks.
IVY CHINA REGION FUND: Ivy China Region Fund's principal investment
objective is long-term capital growth. Consideration of current income is
secondary to this principal objective. The Fund seeks to meet its objective
primarily by investing in the equity securities of companies that are expected
to benefit from the economic development and growth of China, Hong Kong and
Taiwan. A significant percentage of the Fund's assets may also be invested in
the securities markets of South Korea, Singapore, Malaysia, Thailand, Indonesia
and the Philippines (collectively, with China, Hong Kong and Taiwan, the "China
Region").
The Fund normally invests at least 65% of its total assets in "Greater China
growth companies," defined as companies (a) that are organized in or for which
the principal securities trading markets are the China Region; (b) that have at
least 50% of their assets in one or more China Region countries or derive at
least 50% of their gross sales revenues or profits from providing goods or
services to or from within one or more China Region countries; or (c) that have
at least 35% of their assets in China, Hong Kong or Taiwan, derive at least 35%
of their gross sales revenues or profits from providing goods or services to or
from within these three countries, or have significant manufacturing or other
operations in these countries. IMI's determination as to whether a company
qualifies as a Greater China growth company is based primarily on information
contained in financial statements, reports, analyses and other pertinent
information (some of which may be obtained directly from the company). The Fund
may invest 25% or more of its total assets in the securities of issuers located
in any one China Region country, and currently expects to invest more than 50%
of its total assets in Hong Kong. See Appendix B to the SAI for further
information about the economic characteristics of certain China Region
countries.
The balance of the Fund's assets ordinarily are invested in (i) certain
investment-grade debt securities and (ii) the equity securities of "China Region
associated companies," which are companies that do not meet the definition of a
Greater China growth company, but whose current or expected performance, based
on certain identified factors (such as the growth trends in the location of a
company's assets and the sources of its revenues and profits), is judged by IMI
to be strongly associated with the China Region. The investment-grade debt
securities in which the Fund may invest include (a) obligations of the U.S.
Government or its agencies or instrumentalities, (b) obligations of U.S. banks
and other banks organized and existing under the laws of Hong Kong, Taiwan or
countries that are members of the Organization for Economic Cooperation and
Development ("OECD"), (c) obligations denominated in any currency issued by
international development institutions and Hong Kong, Taiwan and OECD member
governments and their agencies and instrumentalities, and (d) corporate bonds
rated Baa or higher by Moody's or BBB or higher by S&P (or if unrated, are
considered by IMI to be of comparable quality), as well as repurchase agreements
with respect to any of the foregoing instruments. The Fund may also invest in
zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or, if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund held no low-rated debt
securities.
The Fund may invest in sponsored or unsponsored ADRs, GDRs, ADSs and GDSs,
warrants, and securities issued on a "when-issued" or firm commitment basis, and
may engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies, and up to 15% of its net assets in
illiquid securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may reduce its position in Greater China growth
companies and Greater China associated companies and increase its investment in
cash and liquid debt securities, such as U.S. Government securities, bank
obligations, commercial paper, short-term notes and repurchase agreements. For
temporary or emergency purposes, the Fund may also borrow up to 10% of the value
of its total assets from banks.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its total assets.
IVY DEVELOPING NATIONS FUND: The Fund's principal objective is long-term
growth. Consideration of current income is secondary to this principal
objective. In pursuing its objective, the Fund invests primarily in the equity
securities of companies that IMI believes will benefit from the economic
development and growth of emerging markets. The Fund considers countries having
emerging markets to be those that (i) are generally considered to be
"developing" or "emerging" by the World Bank and the International Finance
Corporation, or (ii) are classified by the United Nations (or otherwise regarded
by their authorities) as "emerging." Under normal market conditions, the Fund
invests at least 65% of its total assets in equity securities (including common
and preferred stocks, convertible debt obligations, warrants, options (subject
to the restrictions set forth below), rights, and sponsored or unsponsored ADRs,
GDRs, ADSs and GDSs that are listed on stock exchanges or traded over-the-
counter) of "Emerging Market growth companies," which are defined as companies
(a) for which the principal securities trading market is an emerging market (as
defined above), (b) that each (alone or on a consolidated basis) derives 50% or
more of its total revenue either from goods, sales or services in emerging
markets, or (c) that are organized under the laws of (and with a principal
office in) an emerging market country.
The Fund normally invests its assets in the securities of issuers located in
at least three emerging market countries, and may invest 25% or more of its
total assets in the securities of issuers located in any one country. IMI's
determination as to whether a company qualifies as an Emerging Market growth
company is based primarily on information contained in financial statements,
reports, analyses and other pertinent information (some of which may be obtained
directly from the company).
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<PAGE> 57
For purposes of capital appreciation, the Fund may invest up to 35% of its
total assets in (i) debt securities of government or corporate issuers in
emerging market countries, (ii) equity and debt securities of issuers in
developed countries (including the United States), and (iii) cash or cash
equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary defensive purposes, the Fund may invest without limit
in such instruments. The Fund may also invest in zero coupon bonds and purchase
securities on a "when-issued" or firm commitment basis.
The Fund will not invest more than 20% of its total assets in debt
securities rated Ba or lower by Moody's or BB or lower by S&P, or if unrated,
are considered by IMI to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds). The Fund will not invest in debt securities rated less
than C by either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment
companies, and up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY GLOBAL FUND: The Fund seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and governments
of any nation. Any income realized will be incidental. Under normal conditions,
the Fund will invest at least 65% of its total assets in the common stock of
companies throughout the world, with at least three different countries (one of
which may be the United States) represented in the Fund's overall portfolio
holdings. Although the Fund generally invests in common stock, it may also
invest in preferred stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs,
and investment-grade debt securities (i.e., those rated Baa or higher by Moody's
or BBB or higher by S&P, or if unrated, are considered by IMI to be of
comparable quality), including corporate bonds, notes, debentures, convertible
bonds and zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund had 1.05% of its total assets
invested in low-rated debt securities.
The Fund may invest in equity real estate investment trusts, warrants, and
securities issued on a "when-issued" or firm commitment basis, and may engage in
foreign currency exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid securities. The
Fund may not, as a matter of fundamental policy, invest more than 5% of its
total assets in restricted securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices, provided the
premium paid for such options does not exceed 10% of the Fund's net assets. The
Fund may also sell covered put options with respect to up to 50% of the value of
its net assets, and may write covered call options so long as not more than 20%
of the Fund's net assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in transactions in (and
options on) stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed 20% of its
total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment objective is
long-term growth. Any income realized will be incidental. Under normal
conditions, the Fund invests at least 65% of its total assets in the equity
securities of companies throughout the world that own, explore or develop
natural resources and other basic commodities, or supply goods and services to
such companies. Under this investment policy, at least three different countries
(one of which may be the United States) will be represented in the Fund's
overall portfolio holdings. "Natural resources" generally include precious
metals (such as gold, silver and platinum), ferrous and nonferrous metals (such
as iron, aluminum and copper), strategic metals (such as uranium and titanium),
coal, oil, natural gases, timber, undeveloped real property and agricultural
commodities. Although the Fund generally invests in common stock, it may also
invest in preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may also invest
directly in precious metals and other physical commodities.
MFC believes that certain political and economic changes in the global
environment in recent years have had and will continue to have a profound effect
on global supply and demand of natural resources, and that rising demand from
developing markets and new sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, MFC will seek to identify
securities of companies that, in MFC's opinion, appear to be undervalued
relative to the value of the companies' natural resource holdings.
For temporary defensive purposes, the Fund may invest without limit in cash
or cash equivalents, such as bank obligations (including certificates of deposit
and bankers' acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may borrow up to
one-third of the value of its total assets from banks, but may not purchase
securities at any time during which the value of the Fund's outstanding loans
exceeds 10% of the value of the Fund's total assets. The Fund may engage in
foreign currency exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid securities.
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<PAGE> 58
For hedging purposes only, the Fund may engage in transactions in (and
options on) foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's principal investment
objective is long-term capital growth. Any income realized will be incidental.
Under normal conditions, the Fund will invest at least 65% of its total assets
in the common stock of companies that are expected to benefit from the
development, advancement and use of science and technology. Under this
investment policy, at least three different countries (one of which may be the
United States) will be represented in the Fund's overall portfolio holdings.
Industries likely to be represented in the Fund's portfolio include computers
and peripheral products, software, electronic components and systems,
telecommunications, media and information services, pharmaceuticals, hospital
supply and medical devices, biotechnology, environmental services, chemicals and
synthetic materials, and defense and aerospace. The Fund may also invest in
companies that are expected to benefit indirectly from the commercialization of
technological and scientific advances. In recent years, rapid advances in these
industries have stimulated unprecedented growth. While this is no guarantee of
future performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs and investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by S&P, or if
unrated, are considered by IMI to be of comparable quality), including corporate
bonds, notes, debentures, convertible bonds and zero coupon bonds. The Fund may
also invest up to 5% of its net assets in debt securities that are rated Ba or
below by Moody's or BB or below by S&P, or if unrated, are considered by IMI to
be of comparable quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by either Moody's
or S&P. As of December 31, 1997, the Fund held no low-rated debt securities.
The Fund may invest in warrants, purchase securities on a "when-issued" or
firm commitment basis, engage in foreign currency exchange transactions and
enter into forward foreign currency contracts. The Fund may also invest (i) up
to 10% of its total assets in other investment companies and (ii) up to 15% of
its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices and on
individual securities, provided the premium paid for such options does not
exceed 10% of the value of the Fund's net assets. The Fund may also sell covered
put options with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the Fund's net assets
is subject to being purchased upon the exercise of the calls. For hedging
purposes only, the Fund may engage in transactions in (and options on) stock
index and foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 20% of the value of its
total assets.
IVY INTERNATIONAL FUND II: The Fund's principal objective is long-term
capital growth primarily through investment in equity securities. Consideration
of current income is secondary to this principal objective. It is anticipated
that at least 65% of the Fund's total assets will be invested in common stocks
(and securities convertible into common stocks) principally traded in European,
Pacific Basin and Latin American markets. Under this investment policy, at least
three different countries (other than the United States) will be represented in
the Fund's overall portfolio holdings. For temporary defensive purposes, the
Fund may also invest in equity securities principally traded in U.S. markets.
IMI, the Fund's investment manager, invests the Fund's assets in a variety of
economic sectors, industry segments and individual securities in order to reduce
the effects of price volatility in any one area and to enable shareholders to
participate in markets that do not necessarily move in concert with U.S.
markets. IMI seeks to identify rapidly expanding foreign economies, and then
searches out growing industries and corporations, focusing on companies with
established records. Individual securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength. Companies in which investments are made will generally have
at least $1 billion in capitalization and a solid history of operations.
When economic or market conditions warrants, the Fund may invest without
limit in U.S. Government securities, investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or if unrated,
considered by IMI to be of comparable quality), preferred stocks, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or cash or cash equivalents
such as bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase agreements. For
temporary or emergency purposes, the Fund may borrow up to 10% of the value of
its total assets from banks. The Fund may also purchase securities on a
"when-issued" or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment companies
and up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY INTERNATIONAL FUND: Sales of shares of this Fund to new investors have
been suspended. See "How to Buy Shares."
The Fund's principal objective is long-term capital growth primarily through
investment in equity securities. Consideration of current income is secondary to
this principal objective. It is anticipated that at least 65% of the Fund's
total assets will be invested in common stocks (and securities convertible into
common stocks) principally traded in European, Pacific Basin and Latin American
markets. Under this investment policy, at least three different countries (other
than the United States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also invest in equity
securities principally traded in U.S. markets.
The Fund's subadviser, Northern Cross Investments Limited ("Northern
Cross"), invests the Fund's assets in a variety of economic sectors, industry
18
<PAGE> 59
segments and individual securities to reduce the effects of price volatility in
any one area and to enable shareholders to participate in markets that do not
necessarily move in concert with U.S. markets. Northern Cross seeks to identify
rapidly expanding foreign economies, and then searches out growing industries
and corporations, focusing on companies with established records. Individual
securities are selected based on value indicators, such as a low price-earnings
ratio, and are reviewed for fundamental financial strength. Companies in which
investments are made will generally have at least $1 billion in capitalization
and a solid history of operations.
When economic or market conditions warrant, the Fund may invest without
limit in U.S. Government securities, investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by Northern Cross to be of comparable quality), preferred stocks,
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or cash or cash
equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may borrow up to 10%
of the value of its total assets from banks. The Fund may also purchase
securities on a "when-issued" or firm commitment basis, and may engage in
foreign currency exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's principal investment
objective is long-term growth primarily through investment in foreign equity
securities. Consideration of current income is secondary to this principal
objective. Under normal circumstances the Fund invests at least 65% of its total
assets in common and preferred stocks (and securities convertible into common
stocks) of foreign issuers having total market capitalization of less than $1
billion. Under this investment policy, at least three different countries (other
than the United States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also invest in equity
securities principally traded in the United States. The Fund will invest its
assets in a variety of economic sectors, industry segments and individual
securities in order to reduce the effects of price volatility in any area and to
enable shareholders to participate in markets that do not necessarily move in
concert with the U.S. market. The factors that IMI considers in determining the
appropriate distribution of investments among various countries and regions
include prospects for relative economic growth, expected levels of inflation,
government policies influencing business conditions and the outlook for currency
relationships.
In selecting the Fund's investments, IMI will seek to identify securities
that are attractively priced relative to their intrinsic value. The intrinsic
value of a particular security is analyzed by reference to characteristics such
as relative price-earnings ratio, dividend yield and other relevant factors
(such as applicable financial, tax, social and political conditions).
When economic or market conditions warrant, the Fund may invest without
limit in U.S. Government securities, investment-grade debt securities, zero
coupon bonds, preferred stocks, warrants, or cash or cash equivalents such as
bank obligations (including certificates of deposit and bankers' acceptances),
commercial paper, short-term notes and repurchase agreements. The Fund may also
invest up to 5% of its net assets in debt securities rated Ba or below by
Moody's or BB or below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or "junk" bonds). The
Fund will not invest in debt securities rated less than C by either Moody's or
S&P. As of December 31, 1997, the Fund held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts. The Fund may
also invest (i) up to 10% of its total assets in other investment companies and
(ii) up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index and foreign currency futures contracts, provided
that the Fund's equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment objective is long-
term capital growth. Consideration of current income is secondary to this
principal objective. The Fund seeks to achieve its investment objective by
investing primarily in the equity securities of companies domiciled or otherwise
doing business (as described below) in European countries. Under normal
circumstances, the Fund will invest at least 65% of its total assets in the
equity securities of "European companies," which include any issuer (a) that is
organized under the laws of a European country; (b) that derives 50% or more of
its total revenues from goods produced or sold, investments made or services
performed in Europe; or (c) for which the principal trading market is in Europe.
The Fund may also invest up to 35% of its total assets in the equity securities
of issuers domiciled outside of Europe. The equity securities in which the Fund
may invest include common stock, preferred stock and common stock equivalents
such as warrants and convertible debt securities. The Fund may also invest in
sponsored or unsponsored ADRs, European Depository Receipts ("EDRs"), GDRs,
ADSs, European Depository Shares ("EDSs") and GDSs. The Fund does not expect to
concentrate its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt securities, but will
not invest more than 20% of its net assets in debt securities rated Ba or below
by Moody's or BB or below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or "junk" bonds). The
Fund will not invest in debt securities rated less than C by either Moody's or
S&P. As of December 31, 1997, the Fund held no low-rated debt securities. The
Fund may also purchase securities on a "when-issued" or firm commitment basis,
engage in foreign currency exchange transactions and enter into forward foreign
currency contracts. In addition, the Fund may invest up to 5% of its net assets
in zero coupon bonds.
For temporary defensive purposes or when IMI believes that circumstances
warrant, the Fund may invest without limit in U.S. Government
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securities, investment-grade debt securities (i.e., those rated Baa or higher by
Moody's or BBB or higher by S&P, or if unrated, are considered by IMI to be of
comparable quality), warrants, and cash or cash equivalents such as domestic or
foreign bank obligations (including certificates of deposit, time deposits and
bankers' acceptances), short-term notes, repurchase agreements, and domestic or
foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P).
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may also invest (i) up to 10% of its
total assets in other investment companies, and (ii) up to 15% of its net assets
in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY SOUTH AMERICA FUND: The Fund's principal investment objective is
long-term capital growth. Consideration of current income is secondary to this
principal objective. Under normal conditions the Fund invests at least 65% of
its total assets in securities issued in South America. Securities of South
American issuers include (a) securities of companies organized under the laws of
a South American country or for which the principal securities trading market is
in South America; (b) securities that are issued or guaranteed by the government
of a South American country, its agencies or instrumentalities, political
subdivisions or the country's central bank; (c) securities of a company,
wherever organized, where at least 50% of the company's non-current assets,
capitalization, gross revenue or profit in any one of the two most recent fiscal
years represents (directly or indirectly through subsidiaries) assets or
activities located in South America; or (d) any of the preceding types of
securities in the form of depository shares. The Fund may participate, however,
in markets throughout Latin America, which for purposes of this Prospectus is
defined as Mexico, Central America, South America and the Spanish-speaking
islands of the Caribbean, and it is expected that the Fund will be invested at
all times in at least three countries. Under present conditions, the Fund
expects to focus its investments in Argentina, Brazil, Chile, Colombia, Peru and
Venezuela, which IMI believes are the most developed capital markets in South
America. The Fund does not expect to concentrate its investments in any
particular industry.
The Fund's equity investments consist of common stock, preferred stock
(either convertible or non-convertible), sponsored or unsponsored ADRs, GDRs,
ADSs and GDSs, and warrants (any of which may be purchased through rights). The
Fund's equity securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market.
The Fund may invest in debt securities (including zero coupon bonds) when
IMI anticipates that the potential for capital appreciation from debt securities
is likely to equal or exceed that of equity securities (e.g., a favorable change
in relative foreign exchange rates, interest rate levels or the creditworthiness
of issuers). These include debt securities issued by South American Governments
("Sovereign Debt"). Most of the debt securities in which the Fund may invest are
not rated, and those that are rated are expected to be below investment-grade
(i.e., rated Ba or below by Moody's or BB or below by S&P, or considered by IMI
to be of comparable quality), and are commonly referred to as "high yield" or
"junk" bonds. As of December 31, 1997, the Fund held no low-rated debt
securities.
To meet redemptions, or while the Fund is anticipating investments in South
American securities, the Fund may hold cash or cash equivalents such as bank
obligations (including certificates of deposit and bankers' acceptances),
commercial paper, short-term notes and repurchase agreements. For temporary
defensive or emergency purposes, the Fund may (i) invest without limit in such
instruments, and (ii) borrow up to one-third of the value of its total assets
from banks (but may not purchase securities at any time during which the value
of the Fund's outstanding loans exceeds 10% of the value of the Fund's total
assets).
The Fund may purchase securities on a "when-issued" or firm commitment
basis, engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies, and up to 15% of its net assets in
illiquid securities. The Fund will treat as illiquid any South American
securities that are subject to restrictions on repatriation for more than seven
days, as well as any securities issued in connection with South American debt
conversion programs that are restricted to remittance of invested capital or
profits.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATED TO IVY ASIA PACIFIC FUND: Certain Asia-
Pacific countries in which the Fund may invest are developing countries, and may
be in the initial stages of their industrialization cycle. The economic
structures of developing countries generally are less diverse and mature than in
the United States, and their political systems may be relatively unstable.
Historically, markets of developing countries have been more volatile than the
markets of developed countries, yet such markets often have provided higher
rates of return to investors.
Investing in securities of issuers in Asia-Pacific countries involves
certain considerations not typically associated with investing in securities of
United States companies, including (i) restrictions on foreign investment and on
repatriation of capital invested in Asian countries, (ii) currency fluctuations,
(iii) the cost of converting foreign currency into United States dollars, (iv)
potential price volatility and lesser liquidity of shares traded on Asia-
Pacific country securities markets and (v) political and economic risks,
including the risk of nationalization or expropriation of assets and the risk of
war.
Certain Asia-Pacific countries may be more vulnerable to the ebb and flow of
international trade and to trade barriers and other protectionist or retaliatory
measures. Investments in countries such as China that have recently opened their
capital markets and that appear to have relaxed their central planning
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requirement, as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions in foreign markets in
general may be longer than in domestic markets, and such delays may be of
particular concern in developing countries. For example, the possibility of
political upheaval and the dependence on foreign economic assistance may be
greater in developing countries than in developed countries, either one of which
may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some Asia-Pacific
countries are subject to less regulatory scrutiny than in the United States. In
addition, due to the limited size of the markets for Asia-Pacific securities,
the prices for such securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which could cause a
decrease not only in the value but also in the liquidity of the Fund's
investments.
SPECIAL CONSIDERATIONS RELATED TO IVY CANADA FUND: The economy of Canada is
strongly influenced by the activities of companies involved in the production
and processing of natural resources, particularly those involved in the energy
industry, industrial materials (e.g., chemicals, base metals, timber and paper)
and agricultural materials (e.g., grain cereals). The securities of companies in
the energy industry are subject to changes in value and dividend yield, which
depend, to a large extent, on the price and supply of energy fuels. Rapid price
and supply fluctuations may be caused by events relating to international
politics, energy conservation and the success of exploration projects.
SPECIAL CONSIDERATIONS RELATED TO IVY CHINA REGION FUND: Investors should
realize that China Region countries may be subject to a greater degree of
economic, political and social instability than is the case in the United States
or other developed countries. Among the factors causing this instability are (i)
authoritarian governments or military involvement in political and economic
decision making, (ii) popular unrest associated with demands for improved
political, economic and social conditions, (iii) internal insurgencies, (iv)
hostile relations with neighboring countries, (v) ethnic, religious and racial
disaffection, and (vi) changes in trading status, any one of which could disrupt
the principal financial markets in which the Fund invests and adversely affect
the value of its assets. In addition, several China Region countries have had
hostile relations with neighboring nations. For example, China continues to
claim sovereignty over Taiwan, and has assumed sovereignty over Hong Kong.
China Region countries tend to be heavily dependent on international trade,
as a result of which their markets are highly sensitive to protective trade
barriers and the economic conditions of their principal trading partners (i.e.,
the United States, Japan and Western European countries). Protectionist trade
legislation, reduction of foreign investment in China Region economies and
general declines in the international securities markets could have a
significant adverse effect on the China Region securities markets. In addition,
certain China Region countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated the assets of
private companies. There is a heightened risk in these countries that such
adverse actions might be repeated.
To take advantage of potential growth opportunities, the Fund might have
significant investments in companies with relatively small market
capitalization. Securities of smaller companies may be subject to more abrupt or
erratic market movements than the securities of larger more established
companies, both because they tend to be traded in lower volume and because the
companies are subject to greater business risk. In addition, to the extent that
any China Region country experiences rapid increases in its money supply or
investment in equity securities for speculative purposes, the equity securities
traded in such countries may trade at price-earning multiples higher than those
of comparable companies trading on securities markets in the United States,
which may not be sustainable. Finally, restrictions on foreign investment exists
to varying degrees in some China Region countries. Where such restrictions
apply, investments may be limited and may increase the Fund's expenses. The SAI
contains additional information concerning the risks associated with investing
in the China Region.
SPECIAL CONSIDERATIONS RELATED TO IVY DEVELOPING NATIONS FUND, IVY GLOBAL
SCIENCE & TECHNOLOGY FUND, AND IVY INTERNATIONAL SMALL COMPANIES FUND: In light
of Ivy Developing Nations Fund's concentration in equity securities of Emerging
Market growth companies (as defined above), an investment in the Fund should be
considered speculative. In addition, both Ivy Global Science & Technology Fund
and Ivy International Small Companies Fund are expected to have significant
investments in companies with relatively small market capitalizations.
Securities of smaller companies may be subject to more abrupt or erratic market
movements than the securities of larger more established companies, both because
they tend to be traded in lower volume and because the companies are subject to
greater business risk.
Because Ivy Global Science & Technology Fund normally focuses its
investments in science and technology-related industries, the value of the
Fund's shares may be more susceptible to factors affecting those industries and
to greater market fluctuation than a fund whose portfolio holdings are more
diverse. For example, rapid advances in these industries tend to render existing
products obsolete. In addition, many companies in which the Fund is likely to
invest are subject to government regulations and approval of their products and
services, which may affect their overall profitability and cause their stock
prices to be more volatile. In selecting the Fund's portfolio of investments,
IMI will consider each company's ability to create new products, secure any
necessary regulatory approvals, and generate sufficient customer demand. A
company's failure to perform well in any one of these areas, however, could
cause its stock to decline sharply.
SPECIAL CONSIDERATIONS RELATED TO IVY GLOBAL NATURAL RESOURCES FUND: Since
the Fund normally invests a substantial portion of its assets in securities of
companies engaged in natural resources activities, the Fund may be subject to
greater risks and market fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in response to
market conditions generally, and will be particularly sensitive to the markets
for those natural resources in which a particular issuer is involved. The values
of natural resources may also fluctuate directly with respect to real and
perceived inflationary trends and various political developments. In addition,
many natural resource companies have been subject to significant costs
associated with compliance with environmental and other safety regulations. In
selecting the Fund's portfolio of investments, IMI will consider each company's
ability to create new products, secure any necessary regulatory approvals, and
generate sufficient customer demand. A company's failure to perform well in any
one of these areas, however, could cause its stock to decline sharply.
To take advantage of potential growth opportunities, the Fund might have
significant investments in companies with relatively small market
capitalization. Securities of smaller companies may be subject to more abrupt or
erratic market movements than the securities of larger more established
companies because they tend to be traded in lower volume and because the
companies are subject to greater business risk.
The Fund's investments in precious metals (such as gold) and other physical
commodities are subject to special risk considerations, including
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substantial price fluctuations over short periods of time. On the other hand,
investments in precious metals, coins or bullion could help to moderate
fluctuations in the value of the Fund's portfolio, since the prices of precious
metals have at times tended not to fluctuate as widely as shares of issuers
engaged in the mining of precious metals. Because precious metals and other
commodities do not generate investment income, however, the return on such
investments will be derived solely from the appreciation and depreciation on
such investments. The Fund may also incur storage and other costs relating to
its investments in precious metals and other commodities, which may, under
certain circumstances, exceed custodial and brokerage costs associated with
investments in other types of securities. When the Fund purchases a precious
metal, IMI currently intends that it will only be in a form that is readily
marketable.
SPECIAL CONSIDERATIONS RELATED TO IVY SOUTH AMERICA FUND: The securities
markets of Latin American countries are substantially smaller, less developed,
less liquid and more volatile than the major securities markets in the United
States. This could cause prices to be erratic for reasons apart from factors
that affect the quality of the securities. For example, limited market size may
cause prices to be unduly influenced by traders who control large positions.
Adverse publicity and investor perception, whether based on fundamental
analysis, may decrease the value and liquidity of portfolio securities,
especially in these markets.
For many years, most Latin American countries have experienced substantial
(and in some periods extremely high) rates of inflation, which have had and may
continue to have very negative effects on the economies and securities markets
of these countries. In addition, certain Latin American countries are among the
largest debtors to commercial banks and foreign governments, and some have
declared moratoria on the payment of principal and/or interest on external debt.
Accordingly, the Sovereign Debt instruments in which the Fund may invest involve
a high degree of risk and should be considered equivalent in quality to debt
securities rated below investment-grade by Moody's and S&P.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and therefore may
invest, with respect to 50% of its total assets, more than 5% of its total
assets in the securities of any one issuer. Consequently, the performance of a
single issuer in which the Fund has invested may have a more significant effect
on the overall performance of the Fund than if the Fund were a diversified
company.
BANK OBLIGATIONS: The bank obligations in which the Funds may invest
include certificates of deposit, bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets in excess of $1 billion,
and (ii) other banks if the principal amount of the obligation is fully insured
by the Federal Deposit Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are limited to obligations of
Federal or state-chartered institutions whose total assets exceed $1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on a Fund's net asset value
of any increase or decrease in the value of the Fund's portfolio securities.
Money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations,
and finance companies. Each Fund's investments in commercial paper are limited
to obligations rated Prime-1 by Moody's or A-1 by S&P, or if not rated, are
issued by companies having an outstanding debt issue currently rated Aaa or Aa
by Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible securities in which the Funds may
invest include corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible securities can be converted
into equity securities, their values will normally vary in some proportion with
those of the underlying equity securities. Convertible securities usually
provide a higher yield than the underlying equity, however, so that the price
decline of a convertible security may sometimes be less substantial than that of
the underlying equity security.
DEBT SECURITIES, IN GENERAL: Investment in debt securities, including
municipal securities, involves both interest rate and credit risk. Generally,
the value of debt instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt securities
generally increases. Conversely, rising interest rates tend to cause the value
of debt securities to decrease. Bonds with longer maturities generally are more
volatile than bonds with shorter maturities. The market value of debt securities
also varies according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the increased risk that
the issuer will be unable to meet its obligations on interest or principal
payments at the time called for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates,
which are mortgage-backed securities). When such securities are held to
maturity, the payment of principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible credit quality.
U.S. Government securities that are not held to maturity are subject to
variations in market value caused by fluctuations in interest rates.
Mortgage-backed securities are securities representing part ownership of a
pool of mortgage loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the loans typically
will be substantially less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the security. Conversely, rising interest rates tend to
decrease the rate of prepayment, thereby lengthening the security's actual
average life (and increasing the security's price volatility). Since it is not
possible to predict accurately the average life of a particular pool, and
because prepayments are reinvested at current rates, mortgage-backed securities
involve significantly greater price and yield volatility than traditional debt
securities.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such
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bonds lack outstanding investment characteristics and have some speculative
characteristics).
LOW-RATED DEBT SECURITIES: Securities rated lower than Baa or BBB, and
comparable unrated securities (commonly referred to as "high yield" or "junk"
bonds), are considered by major credit-rating organizations to have
predominately speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal. Investors in those Funds that invest in
these securities should be aware of and willing to accept the special risks
associated with these securities.
While high yield debt securities are likely to have some quality and
protective characteristics, these qualities are largely outweighed by the risk
of exposure to adverse conditions and other uncertainties. Accordingly,
investments in such securities, while generally providing for greater income and
potential opportunity for gain than investments in higher-rated securities, also
entail greater risk (including the possibility of default or bankruptcy of the
issuer of such securities) and generally involve greater price volatility than
securities in higher rating categories. IMI seeks to reduce risk through
diversification (including investments in foreign securities), credit analysis
and attention to current developments and trends in both the economy and
financial markets. Should the rating of a portfolio security be downgraded, IMI
will determine whether it is in the affected Fund's best interest to retain or
dispose of the security (unless the security is downgraded below the rating of
C, in which case IMI most likely would dispose of the security based on then
existing market conditions). For additional information regarding the risks
associated with investing in high yield bonds, see the SAI (and, in particular,
Appendix A, which contains a more complete description of the ratings assigned
by Moody's and S&P).
FOREIGN SECURITIES: The foreign securities in which the Funds invest may
include non-U.S. dollar-denominated securities, Eurodollar securities, sponsored
or unsponsored ADRs, GDRs, ADSs and GDSs, and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions or
instrumentalities thereof). Investors should consider carefully the special
risks that arise in connection with investing in securities issued by companies
and governments of foreign nations, which are in addition to those risks that
are associated with the Funds' investments, generally.
In many foreign countries, there is less regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. For example, foreign companies are not generally subject to uniform
accounting and financial reporting standards, and foreign securities
transactions may be subject to higher brokerage costs. There also tends to be
less publicly available information about issuers in foreign countries, and
foreign securities markets of many of the countries in which the Funds may
invest may be smaller, less liquid and subject to greater price volatility than
those in the United States. Generally, price fluctuations in the Funds' foreign
security holdings are likely to be high relative to those of securities issued
in the United States.
Other risks include the possibility of expropriation, nationalization or
confiscatory taxation, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), difficulties in
pricing, default in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social instability, or
other developments that could adversely affect the Funds' foreign investments.
In addition, investing in foreign securities usually involves the use of foreign
currencies. For a description of the risk associated with such currencies, see
the SA1.
The risks of investing in foreign securities (described above) are likely to
be intensified in the case of investments in issuers domiciled or doing
substantial business in countries with emerging or developing economies
("emerging markets"). For example, countries with emerging markets may have
relatively unstable governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of assets). Security
prices in emerging markets can also be significantly more volatile than in the
more developed nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Delayed settlements could cause a Fund to miss attractive investment
opportunities or impair its ability to dispose of portfolio securities,
resulting in a loss if the value of the securities subsequently declines. In
addition, many emerging markets have experienced and continue to experience
especially high rates of inflation. In certain countries, inflation has at times
accelerated rapidly to hyperinflationary levels, creating a negative interest
rate environment and sharply eroding the value of outstanding financial assets
in those countries.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. In order for these
emerging economies to continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is essential. Historically,
there is a strong direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI believes that
investment opportunities (particularly in the energy, environmental services,
natural resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which the Funds and their shareholders will benefit. IMI believes
that similar investment opportunities will be created for companies involved in
providing consumer goods and services (e.g., food, beverages, autos, housing,
tourism and leisure and merchandising).
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: A Fund usually effects its currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. However, some price spread on currency exchange
(e.g., to cover service charges) is usually incurred when a Fund converts assets
from one currency to another. A Fund may also be affected unfavorably by
fluctuations in the relative rates of exchange between the currencies of
different nations or by political or economic developments in the U.S. or
abroad. For example, significant uncertainty surrounds the proposed introduction
of the euro (a common currency for the European Union) in January 1999 and its
effect on the value of securities denominated in local European currencies.
These and other currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the Funds.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date
at a predetermined price. Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the hedged currencies, they also
tend to limit any potential gain that might result should the value of the
currencies increase. In addition, there may be an imperfect correlation between
a Fund's portfolio holdings of securities denominated in a particular currency
and forward contracts entered into by the Fund, which may prevent the Fund from
achieving the intended hedge or expose the Fund to the risk of currency exchange
loss.
OPTIONS AND FUTURES TRANSACTIONS: The Funds may use various techniques to
increase or decrease their exposure to changing security prices, currency
exchange rates, commodity prices, or other factors that affect the value of the
Funds' securities. These techniques may involve derivative transac-
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tions such as purchasing put and call options, selling put and call options, and
engaging in transactions in foreign currency futures, stock index futures and
related options.
A Fund may invest in options on securities in accordance with its stated
investment objective and policies (see above). A put option is a short-term
contract that gives the purchaser of the option the right, in return for a
premium, to sell the underlying security or currency to the seller of the option
at a specified price during the term of the option. A call option is a
short-term contract that gives the purchaser the right, in return for a premium,
to buy the underlying security or currency from the seller of the option at a
specified price during the term of the option. An option on a stock index gives
the purchaser the right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of the option.
A Fund may also enter into futures transactions in accordance with its
stated investment objective and policies. An interest rate futures contract is
an agreement between two parties to buy or sell a specified debt security at a
set price on a future date. A foreign currency futures contract is an agreement
to buy or sell a specified amount of a foreign currency for a set price on a
future date. A stock index futures contract is an agreement to take or make
delivery of an amount of cash based on the difference between the value of the
index at the beginning and at the end of the contract period.
Investors should be aware that the risks associated with the use of options
and futures are considerable. Options and futures transactions generally involve
a small investment of cash relative to the magnitude of the risk assumed, and
therefore could result in a significant loss to a Fund if IMI judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments. A Fund may also experience a significant loss if it is
unable to close a particular position due to the lack of a liquid secondary
market. For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES: Investors in Ivy Global
Natural Resources Fund should be aware that commodities trading is generally
considered a speculative activity. For example, prices of precious metals are
affected by factors such as cyclical economic conditions, political events and
monetary policies of various countries. Accordingly, markets for precious metals
may at times be volatile and there may be sharp price fluctuations even during
periods when prices overall are rising. Investments in physical commodities may
also present practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and increased
expenses.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
corporation, trust or association that invests in real estate mortgages or
equities for the benefit of its investors. REITs are dependent upon management
skill, may not be diversified and are subject to the risks of financing
projects. Equity REITs are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption under the 1940 Act. By investing
in REITs indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and agreed-upon
yield. Each Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. A Fund could experience a delay in obtaining direct ownership
of the underlying collateral, and might incur a loss if the value of the
security should decline.
ILLIQUID SECURITIES: An "illiquid security" is an asset that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security on its books.
Illiquid securities may include securities that are subject to restrictions on
resale ("restricted securities") because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"). Illiquid securities often
offer the potential for higher returns than more readily marketable securities,
but carry the risk that the Fund may not be able to dispose of them at an
advantageous time or price. The Fund may have to bear the expense of registering
restricted securities for resale, and the risk of substantial delays in
effecting such registrations. In addition, issuers of restricted securities may
not be subject to the disclosure and other investor protection requirements that
would apply if their securities were publicly traded.
SHARES OF OTHER INVESTMENT COMPANIES: As a shareholder of an investment
company, a Fund will bear its ratable share of the investment company's expenses
(including management fees, in the case of a management investment company).
SMALL COMPANIES: Investing in smaller company stocks involves certain
special considerations and risks that are not usually associated with investing
in larger, more established companies. For example, the securities of smaller
companies may be subject to more abrupt or erratic market movements, because
they tend to be thinly traded and are subject to a greater degree to changes in
the issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs in smaller
company stocks also may be higher than those of larger companies.
WARRANTS: The holder of a warrant has the right to purchase a given number
of shares of a particular issuer at a specified price until expiration of the
warrant. Such investments can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and are considered
speculative investments. For example, if a warrant were not exercised by the
date of its expiration, a Fund would lose its entire investment.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: Purchasing securities on a
"when-issued" or firm commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
ZERO COUPON BONDS: Zero coupon bonds are debt obligations issued without
any requirement for the periodic payment of interest, and are issued at a
significant discount from face value. Since the interest on such bonds is, in
effect, compounded, they are subject to greater market value fluctuations in
response to changing interest rates than debt securities that distribute income
regularly. In addition, for Federal income tax purposes a Fund generally
recognizes and is required to distribute income generated by zero coupon bonds
currently in the amount of the unpaid accrued interest, even though the actual
income will not yet have been received by the Fund.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund, other than Ivy South America Fund, is organized as a separate,
diversified portfolio of the Trust, an open-end management investment company
organized as a Massachusetts business trust on December 21, 1983. Ivy South
America Fund is organized as a non-diversified portfolio (see "Special
Considerations Related to Ivy South America Fund"). The business and affairs of
each Fund are managed under the direction of the Trustees. Information about the
Trustees, as well as the Trust's executive officers, may be found in the SAI.
The Trust has an unlimited number of authorized shares of
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beneficial interest, and currently has 18 separate portfolios. Each Fund offers
Class A, Class B and Class C shares, and all Funds other than Ivy International
Fund offer an Advisor Class (which is described in a separate prospectus). Ivy
Global Science & Technology Fund, Ivy International Fund, Ivy International Fund
II and Ivy International Small Companies Fund also offer Class I shares. Shares
of each Fund entitle their holders to one vote per share (with proportionate
voting for fractional shares). The shares of each class represent an interest in
the same portfolio of Fund investments. Each class of shares, except for the
Advisor Class and Class I, has a separate Rule 12b-1 distribution plan and bears
different distribution fees. Class I shares are subject to lower administrative
service and transfer agency fees than the Funds' Class A, Class B, Class C and
Advisor Class shares. Each class of shares also has its own sales charge and
expense structure that may affect its performance relative to a Fund's other
classes of shares. Shares of each class have equal rights as to voting,
redemption, dividends and liquidation but have exclusive voting rights with
respect to their Rule 12b-1 distribution plans.
The Trust employs IMI to provide business management services to the Funds,
and investment advisory services to all of the Funds other than Ivy Canada Fund
and Ivy Global Natural Resources Fund (which are advised by MFC). IMI has been
an investment advisor since 1992. MIMI provides administrative and accounting
services. Ivy Mackenzie Distributors, Inc. ("IMDI") distributes the Funds'
shares, and Ivy Mackenzie Services Corp. ("IMSC") provides transfer agency and
shareholder-related services for the Funds. IMI, IMDI and IMSC are wholly-owned
subsidiaries of MIMI. As of March 31, 1998, IMI and MIMI had approximately $3.9
billion and $1.3 billion, respectively, in assets under management. MIMI is a
subsidiary of MFC, which has been an investment counsel and mutual fund manager
in Toronto, Ontario, Canada for more than 31 years.
INVESTMENT MANAGER
ALL FUNDS: For IMI's business management services and the investment
advisory services provided by IMI or MFC (as the case may be), each Fund pays a
fee based on its average net assets at the percentage rates set forth below
(subject to any applicable fee reimbursements or waivers noted in footnotes to
the "Annual Fund Operating Expenses" table on page 2). IMI voluntarily limits
each Fund's, except Ivy International Fund and Ivy Canada Fund, total operating
expenses (excluding Rule 12b-1 fees, interest, taxes, brokerage commissions,
litigation, indemnification, and extraordinary expenses) to 1.95% (1.50%, in the
case of Ivy International Fund II) of their respective average net assets, which
may lower their expenses and increase their total return (see the "Annual Fund
Operating Expenses"). Ivy Global Fund and Ivy Global Science & Technology Fund
total operating expenses for the year ended December 31, 1997 were below this
limit. This voluntary expense limitation may be terminated or revised at any
time.
IMI pays all expenses that it incurs in rendering management services to the
Funds. Each Fund bears its own operational costs. General expenses of the Trust
that are not readily identifiable as belonging to a particular Fund (or a
particular class thereof) are allocated among and charged to each Fund based on
its relative net asset size. Expenses that are attributable to a particular Fund
(or class thereof) will be borne by that Fund (or class) directly. The
investment management fees paid by the Funds are higher than those charged by
many funds that invest primarily in U.S. securities, but not necessarily higher
than the fees charged to funds with investment objectives similar to those of
the Funds.
IVY CANADA FUND AND IVY GLOBAL NATURAL RESOURCES FUND: For IMI's business
management services, each Fund pays IMI a fee at an annual rate of 0.50%. Each
Fund pays MFC a fee for advisory services at an annual rate of 0.35% and 0.50%
for Ivy Canada Fund and Ivy Global Natural Resources Fund, respectively.
IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY DEVELOPING NATIONS FUND,
IVY GLOBAL SCIENCE & TECHNOLOGY FUND, IVY INTERNATIONAL FUND II, IVY
INTERNATIONAL FUND, IVY INTERNATIONAL SMALL COMPANIES FUND, IVY PAN-EUROPE FUND
AND IVY SOUTH AMERICA FUND: For IMI's business management and investment
advisory services, each Fund pays IMI a fee at an annual rate of 1.00%.
Northern Cross has served as subadviser for Ivy International Fund since
1993. For this service, IMI pays Northern Cross a fee that is equal, on an
annual basis, to 0.60% of the first $1.5 billion in average net assets, 0.55% of
the next $1 billion in average net assets and 0.50% of average net assets in
excess of $2.5 billion.
IVY GLOBAL FUND: For IMI's business management and investment advisory
services, the Fund pays IMI a fee at an annual rate of 1.00% of the first $500
million in net assets and 0.75% on net assets over $500 million. For the year
ended December 31, 1997, the effective management fee paid to IMI was 1.00% of
the Fund's average net assets.
PORTFOLIO MANAGEMENT: The following individuals have responsibilities for
management of the Funds:
- James W. Broadfoot, President and Chief Investment Officer of IMI and Vice
President of the Trust, and has been the portfolio manager for Ivy Global
Science & Technology Fund since 1996. Prior to joining the organization in
1990, Mr. Broadfoot was a principal in an investment counsel firm
specializing in emerging growth companies. Mr. Broadfoot has 25 years of
professional investment experience, and is a Chartered Financial Analyst.
He has an MBA from The Wharton School of the University of Pennsylvania.
- Hakan Castegren, President of Northern Cross, has been the portfolio
manager for Ivy International Fund since 1986 and has 40 years of
professional investment experience. He earned his MBA from the Stockholm
School of Economics.
- Michael G. Landry is the Chairman and a Director of IMI and the President
and a Director of MIMI and the Chairman and a Trustee of the Trust. Mr.
Landry has headed these organizations since 1987. Previously he was a
Senior Vice President and portfolio manager with Templeton International.
He has over 21 years of professional investment experience. He has a
degree in economics from Carleton University. Mr. Landry has been the
portfolio manager for Ivy Global Fund and since 1991 Ivy Developing
Nations Fund since 1994, and is a member of the Ivy international
portfolio management team.
- Frederick Sturm, a Senior Vice President of MFC, has been the portfolio
manager of Ivy Canada Fund since 1992 and Ivy Global Natural Resources
Fund since 1997. Mr. Sturm joined MFC in 1983 and has 12 years of
professional investment experience. In that time, Mr. Sturm has
established a performance record in the natural resource sector. Mr.
Sturm, a Chartered Financial Analyst, is a graduate of the University of
Toronto where he earned a degree in commerce and finance.
- Barbara Trebbi, a Senior Vice President of IMI, and has been portfolio
manager of Ivy International Fund II and Ivy International Small Companies
Fund since 1997. She is Managing Director of International Equities and a
member of the Ivy international portfolio management team. Ms. Trebbi
joined the organization in 1988 and has 10 years of professional
investment experience. She is a Chartered Financial Ana-
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lyst and holds a graduate diploma from the London School of Economics.
- The Ivy international portfolio management team has managed Ivy Asia
Pacific Fund since 1997, Ivy China Region Fund since 1993, Ivy Pan-Europe
Fund since 1997 and Ivy South America Fund since 1995. The Ivy
international portfolio management team consists of Barbara Trebbi,
Michael Landry and the Ivy international research team headed by Eric
Michelis. Mr. Michelis has a graduate degree in Economics and Finance from
Institut Des Etudes Politiques de Paris and a graduate degree from Ecole
Francaise D'Electronique et D'Informatique. Other team members include
Oleg Makhorine, located in Prague, who is a graduate of the Economics
University in Prague; Justin Lu, who is a graduate of Shanghai
International University; Moira McLachlan, who earned her degree in
international business from the University of South Carolina; and Jonathan
Tang, located in Shanghai, who is a graduate of Shanghai International
University.
IMI'S INVESTMENT PROCESS: Each of IMI's international equity portfolio
managers is supported by a team of research analysts, who are responsible for
providing objective information on regional and country-specific economic and
political developments and monitoring individual companies. Members of the
research analyst team that supports IMI's international equity portfolio
managers are located in the U.S. at IMI's south Florida office, as well as in
Asia and Europe. IMI's analysts use a variety of research sources, such as
brokerage reports, economic and financial news services, equity databases and
company reports. Established relationships with more than thirty research firms
provide IMI's analysts and portfolio managers access to information on the
various factors that may influence a particular investment decision. These firms
range from large investment banks with global coverage to local research houses.
In many cases, IMI's investment professionals also conduct primary research by
meeting with company management, touring facilities, and speaking with local
research analysts, economists and strategists. Such primary research is
considered particularly important in emerging market countries.
Research efforts by IMI focus on determining opportunities that fall within
IMI's long-term, value-oriented approach to investing. The investment decision
making process starts with a "top-down" view of a particular country and the
long-term outlook for given industries within that country. Company selection
generally is based on a "bottom-up" analysis of certain value measures (e.g.,
earnings, cash flow and growth potential) that are monitored in a proprietary
database in which risk-adjusted company valuations across countries and
industries are compared. Ultimate investment decisions take into account the
fund's investment objective, diversification requirements and risk tolerance
level. While current earnings are considered important, investment decisions
most often are based on earnings estimates over a five-year period. Stock
selection typically is concentrated in the cheapest 20% of the universe and sell
recommendations normally are generated when valuations reach the top 20% of the
universe.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Funds, such as
maintaining the registration of Fund shares under state "Blue Sky" laws, and
assisting with the preparation of Federal and state income tax returns,
financial statements and periodic reports to shareholders. MIMI also assists the
Trust's legal counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this arrangement, the
average net assets attributable to each Fund's Class A, Class B and Class C
shares are subject to a fee, accrued daily and paid monthly, at an annual rate
of 0.10%. The average net assets attributable to Class I shares are subject to a
fee at the annual rate of 0.01%.
MIMI also provides certain accounting and pricing services for the Funds
(see "Fund Accounting Services" in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Funds, and also
provides certain shareholder-related services. Certain broker-dealers that
maintain shareholder accounts with the Funds through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment Advisory and
Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an initial sales charge,
unless the amount you purchase is $500,000 or more (see "Contingent Deferred
Sales Charge -- Class A Shares"). Certain purchases qualify for a reduced
initial sales charge (see "Qualifying for a Reduced Sales Charge"). Class A
shares (for all Funds except Ivy Canada Fund) are subject to ongoing service
fees at an annual rate of 0.25% of a Fund's average net assets attributable to
its Class A shares (excluding Class A shares of Ivy International Fund held in
accounts opened prior to January 1, 1992). Class A shares of Ivy Canada Fund are
subject to ongoing service and distribution fees at a combined annual rate of
0.40% of the Fund's average net assets attributable to its Class A shares. If
you do not specify on your Account Application which class of shares you are
purchasing, it will be assumed that you are investing in Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C shares are not subject to
an initial sales charge, but are subject to a CDSC if redeemed within six years
of purchase, in the case of Class B shares, or within one year of purchase, in
the case of Class C shares. Both classes of shares are subject to ongoing
service and distribution fees at a combined annual rate of up to 1.00% of a
Fund's average net assets attributable to its Class B or Class C shares. The
ongoing distribution fee will cause these shares to have a higher expense ratio
than that of Class A shares and Class I shares.
CLASS I SHARES: Class I shares are offered by Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund and Ivy
International Small Companies Fund only to institutions and certain individuals,
and are not subject to an initial sales charge or a CDSC, nor to ongoing service
or distribution fees. Class I shares also bear lower fees than Class A, Class B
and Class C shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE: The multi-class structure
of the Funds allows you to choose the most beneficial way to buy shares given
the size of your purchase and the length of time you expect to hold your shares.
You should consider whether, during the anticipated life of your Fund
investment, the accumulated service and distribution fees on Class B and Class C
shares would be less than the initial sales charge and accumulated service fees
on Class A shares purchased at the same time, and to what extent this
differential would be offset by the Class A shares' potentially higher yield.
Also, sales personnel may receive different compensation depending on which
class of shares they are selling. The tables under the caption "Annual Fund
Operating Expenses" at the beginning of this Prospectus contain additional
information that is designed to assist you in making this determination.
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DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from a Fund are reinvested in
additional shares of the same class of the Fund unless you elect to receive them
in cash. Dividends ordinarily will vary from one class to another.
Each Fund will distribute net investment income and net realized capital
gains, if any, at least once a year. An additional distribution may be made of
net investment income and net realized capital gains to comply with the calendar
year distribution requirement under the excise tax provisions of Section 4982 of
the Code.
TAXATION: The following discussion is intended for general information
only. You should consult with your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status of distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as a regulated investment company
under the Code. To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any Federal income or excise tax.
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of a Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that a Fund designates as capital gain dividends, are
taxable to individual shareholders at a maximum 20% or 28% capital gains rate,
regardless of how long the shareholder has held the Fund's shares. Dividends are
taxable to shareholders in the same manner whether received in cash or
reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in debt securities that are issued at a discount will result in
income to a Fund equal to a portion of the excess of the face value of the
securities over their issue price, even though the Fund receives no cash
interest payments from the securities.
Income and gains received by a Fund from sources within foreign countries
may be subject to foreign withholding and other taxes. Unless a Fund is eligible
to and elects to "pass through" to its shareholders the amount of foreign income
and similar taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of investment company
taxable income received from the Fund will be treated as U.S. source income.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which may be
eligible for reduced Federal tax rates, generally depending upon the
shareholder's holding period for the shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service
("IRS") that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies, authorities and instrumentalities
may be exempt from state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield") is computed
separately for each class of Fund shares in accordance with formulas prescribed
by the SEC. Performance information for each class may be compared in reports
and promotional literature to indices such as the Standard and Poor's 500 Stock
Index, Dow Jones Industrial Average, and Morgan Stanley Capital International
World Index. Advertisements, sales literature and communications to shareholders
may also contain statements of a Fund's current yield, various expressions of
total return and current distribution rate. Performance figures will vary in
part because of the different expense structures of the Funds' different
classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in a Fund for a
specified period, and assumes the reinvestment of all distributions and
mposition of the maximum applicable sales charge. "Average annual total return"
represents the average annual compound rate of return of an investment in a
particular class of Fund shares assuming the investment is held for one year,
five years and ten years as of the end of the most recent calendar quarter.
Where a Fund provides total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value, "total return"
is based on the total of all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the original
investment expressed as a percentage of the purchase price.
"Current yield" reflects the income per share earned by a Fund's portfolio
investments, and is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and then annualizing the result. Dividends or
distributions that were paid to a Fund's shareholders are reflected in the
"current distribution rate," which is computed by dividing the total amount of
dividends per share paid by a Fund during the preceding 12 months by the Fund's
current maximum offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield" computation
because it may include distributions to shareholders from sources other than
dividends and interest, short term capital gain and net equalization credits and
will be calculated over a different period of time.
HOW TO BUY SHARES
Effective April 18, 1997, Ivy International Fund suspended the offer of its
shares to new investors. Shares of Ivy International Fund are available for
purchase only by existing shareholders of Ivy International Fund. Once a
shareholder's account has been liquidated, the shareholder may not invest in Ivy
International Fund at a later date.
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OPENING AN ACCOUNT: Complete and sign the Account Application on the last
page of this Prospectus. Make your check payable to the Fund in which you are
investing. No third party checks will be accepted. Deliver these items to your
registered representative or selling broker, or send them to one of the
addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Funds reserve the right to reject any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment is $1,000; the
minimum additional investment is $100. Initial or additional amounts for
retirement accounts may be less (see "Retirement Plans").
Accounts in Class I of any of the Class I Funds can be opened with a minimum
initial investment of $5,000,000; the minimum additional investment is $10,000.
BUYING ADDITIONAL SHARES: You may add to your account at any time through
any of the following options:
By Mail: Complete the investment slip attached to your statement, or write
instructions including the account registration, Fund number and account number
of the shares you wish to purchase. Send your check (payable to the Fund in
which you are investing), along with your investment slip or written
instructions, to one of the addresses above.
Through your Broker: Deliver to your registered representative or selling
broker the investment slip attached to your statement, or written instructions,
along with your payment.
By Wire: Purchases may also be made by wiring money from your bank account
to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as
follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
By Automatic Investment Method: Complete Sections 6A and 7B on the Account
Application (see "Automatic Investment Method" on page 35 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of a Fund is the net asset value
("NAV") per share plus a sales charge. The purchase price per share is known as
the public offering price. Your purchase price for Class B, Class C and Class I
shares is the NAV per share.
Share purchases will be made at the next determined price after your
purchase order is received. The price is effective for orders received by IMSC
or by your registered securities dealer prior to the time of the determination
of the NAV. Any orders received after the time of the determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer before the NAV is determined that are
transmitted through the facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's price. Any loss
resulting from the dealer's failure to submit an order by the deadline will be
borne by that dealer.
You will receive an account statement after any purchase, exchange or full
liquidation. Statements related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further explanation) and/or
systematic withdrawal plans will be sent quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is determined for each
Class of shares as of the close of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open by dividing the value of a Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding, adjusted to the nearest cent. These procedures are described more
completely in the SAI.
The Trustees have established procedures to value a Fund's securities in
order to determine the NAV. Securities and other assets for which market prices
are not readily available are valued at fair value, as determined by IMI and
approved by the Trustees.
Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange. Trading
on these foreign exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on which there is no
regular trading on the Exchange. If events materially affecting the value of the
Fund's portfolio securities occur between the time when these foreign exchanges
close and the time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and approved by the
Trustees. Money market instruments of a Fund are valued at amortized cost.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price equal to their NAV per share
plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------- PORTION OF
AS A AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED
AMOUNT INVESTED PRICE INVESTED BY DEALER
--------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $50,000.................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....................... 5.25% 5.54% 4.50%
$100,000 but less than $250,000...................... 4.50% 4.71% 3.75%
$250,000 but less than $500,000...................... 3.00% 3.09% 2.50%
$500,000 or over*.................................... 0.00% 0.00% 0.00%
</TABLE>
* A CDSC may apply to the redemption of Class A shares that are purchased
without an initial sales charge. See "Contingent Deferred Sales Charge --
Class A Shares."
Sales charges are not applied to any dividends or capital gains that are
reinvested in additional shares of the Fund. An investor may be charged a
28
<PAGE> 69
transaction fee for Class A and Class I shares purchased or redeemed at NAV
through a broker or agent other than IMDI.
With respect to purchases of $500,000 or more through dealers or agents,
IMDI may, at the time of purchase, pay such dealers or agents from its own
resources a commission to compensate such dealers or agents for their
distribution assistance in connection with such purchases. The commission would
be computed as set forth below:
NAV COMMISSION TABLE
(FOR ALL FUNDS EXCEPT IVY INTERNATIONAL FUND)
<TABLE>
<CAPTION>
PURCHASE AMOUNT COMMISSION
--------------- ----------
<S> <C> <C>
First $3,000,000.................................................. 1.00%
Next $2,000,000.................................................. .50%
Over $5,000,000.................................................. .25%
</TABLE>
NAV COMMISSION TABLE
(IVY INTERNATIONAL FUND)
<TABLE>
<CAPTION>
PURCHASE AMOUNT COMMISSION
--------------- ----------
<S> <C> <C>
First $3,000,000.................................................. .50%
Next $2,000,000.................................................. .25%
Over $5,000,000.................................................. .10%
</TABLE>
Dealers who receive 90% or more of the sales charge may be deemed to be
"underwriters" as that term is defined in the 1933 Act.
IMDI compensates participating brokers who sell Class A shares through the
initial sales charge. IMDI retains that portion of the initial sales charge that
is not reallowed to the dealers, which it may use to distribute a Fund's Class A
shares. Pursuant to separate distribution plans for the Funds' Class A, Class B
and Class C shares, IMDI bears various promotional and sales related expenses,
including the cost of printing and mailing prospectuses to persons other than
shareholders. Pursuant to the Funds' Class A distribution plans, IMDI currently
pays a continuing service fee to qualified dealers at an annual rate of 0.25% of
qualified investments.
IMDI may from time to time pay a bonus or other incentive to dealers (other
than IMDI) which employ a registered representative who sells a minimum dollar
amount of the shares of a Fund and/or other funds distributed by IMDI during a
specified period of time. This bonus or other incentive may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or without the U.S. or other bonuses such as gift
certificates or the cash equivalent of such bonus or incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares will be made at NAV with no
initial sales charge, but if the shares are redeemed within 24 months (12
months, in the case of Ivy International Fund) after the end of the calendar
month in which the purchase was made (the CDSC period), a CDSC of 1.00% will be
imposed (0.50% in the case of Ivy International Fund).
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends or capital gains which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will
be determined in a manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first made from
any shares in your account not subject to the CDSC. The CDSC is waived in
certain circumstances. See the discussion below under the caption "Waiver of
Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is waived for (i)
redemptions in connection with distributions not exceeding 12% annually of the
initial account balance (i.e., the value of the shareholder's Class A Fund
account at the time of the initial distribution) (ia) following retirement under
a tax qualified retirement plan, or (ib) upon attaining age 59 1/2 in the case
of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or a
Keogh Plan; (ii) redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or complete redemption following
the death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is named, provided
that the redemption is requested within one year of death or disability. IMDI
may require documentation prior to waiver of the CDSC.
Class A shareholders may exchange their Class A shares subject to a CDSC
("outstanding Class A shares") for Class A shares of another Ivy fund ("new
Class A shares") on the basis of the relative NAV per Class A share, without the
payment of any CDSC that would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have been charged if the
outstanding Class A shares were redeemed will carry over to the new Class A
shares received in the exchange, and will be charged accordingly at the time of
redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of Accumulation ("ROA") is calculated
by determining the current market value of all Class A shares in all Ivy fund
accounts (except Ivy Money Market Fund) owned by you, your spouse, and your
children under 21 years of age. ROA is also applicable to accounts under a
trustee or other single fiduciary (including retirement accounts qualified under
Section 401 of the Code). The current market value of each of your accounts as
described above is added together and then added to your current purchase
amount. If the combined total is equal or greater than a breakpoint amount for
the Fund you are purchasing, then you qualify for the reduced sales charge on
that purchase. To reduce or eliminate the sales charge, you must complete
Section 4C of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent ("LOI") is a non-binding
agreement that states your intention to invest in additional Class A or Class I
shares, within a thirteen month period after the initial purchase, an amount
equal to a breakpoint amount for a Fund. The LOI may be backdated up to 90 days.
To sign an LOI, please complete Section 4C of the Account Application.
Should the LOI not be fulfilled within the thirteen month period, your
account will be debited for the difference between the full sales charge that
applies for the amount actually invested and the reduced sales charge actually
paid on purchases placed under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE: Investors who held Ivy Fund
shares as of December 31, 1991, or who held shares of certain funds that were
reorganized into an Ivy fund, may be exempt from sales charges on the purchase
of Class A shares of any of the Ivy funds. If you believe you may be eligible
for such an exemption, please contact IMSC at 1-800-235-3322 for additional
information.
29
<PAGE> 70
Class A shares of a Fund may be purchased without an initial sales charge or
CDSC by (i) officers and Trustees of the Trust (and their relatives), (ii)
officers, directors, employees, retired employees, legal counsel and accountants
of IMI, MIMI, and MFC (and their relatives), and (iii) directors, officers,
partners, registered representatives, employees and retired employees (and their
relatives) of dealers having a sales agreement with IMDI (or trustees or
custodians of any qualified retirement plan or IRA established for the benefit
of any such person). In addition, certain investment advisors and financial
planners who charge a management, consulting or other fee for their services and
who place trades for their own accounts or the accounts of their clients may
purchase Class A shares of a Fund without an initial sales charge or a CDSC,
provided such purchases are placed through a broker or agent who maintains an
omnibus account with that Fund. Also, clients of these advisors and planners may
make purchases under the same conditions if the purchases are through the master
account of such advisor or planner on the books of such broker or agent. This
provision applies to assets of retirement and deferred compensation plans and
trusts used to fund those plans including, but not limited to, those defined in
Section 401(a), 403(b) or 457 of the Code and "Rabbi Trusts" whose assets are
used to purchase shares of a Fund through the aforementioned channels.
Class A shares of a Fund may be purchased at NAV by retirement plans
qualified under section 401(a) or 403(b) of the Code, subject to the Employee
Retirement Income Security Act of 1974, as amended. A CDSC of 1.00% (0.50% in
the case of Ivy International Fund) will be imposed on such purchases in the
event of certain plan-level redemption transactions within 24 months (12 months
in the case of Ivy International Fund) following such purchases. Class A shares
of a Fund are made available to Merrill Lynch Daily K Plan (the "Plan")
participants at NAV without an initial sales charge if the Plan has at least $3
million in assets or 500 or more eligible employees. Class B shares of a Fund
are made available to Plan participants at NAV without a CDSC if the Plan has
less than $3 million in assets or fewer than 500 eligible employees. For further
information see "GROUP SYSTEMATIC INVESTMENT PROGRAM" in the Fund's SAI.
If investments by retirement plans at NAV are made through a dealer who has
executed a dealer agreement with respect to a Fund, IMDI may, at the time of
purchase, pay the dealer out of IMDI's own resources a commission to compensate
the dealer for its distribution assistance in connection with the retirement
plan's investment. Please refer to the NAV Commission Tables on page 28 of this
Prospectus. Please contact IMDI for additional information.
Class A shares can also be purchased without an initial sales charge, but
subject to a CDSC of 1.00% during the first 24 months (0.50% during the first 12
months in the case of Ivy International Fund), by: (a) any state, county or city
(or any instrumentality, department, authority or agency of such entities) that
is prohibited by applicable investment laws from paying a sales charge or
commission when purchasing shares of a registered investment management company
(an "eligible governmental authority"), and (b) trust companies, bank trust
departments, credit unions, savings and loans and other similar organizations in
their fiduciary capacity or for their own accounts, subject to any minimum
requirements set by IMDI (currently, these criteria require that the amount
invested or to be invested in the subsequent 13-month period totals at least
$250,000). In either case, IMDI may pay commissions to dealers that provide
distribution assistance on the same basis as in the preceding paragraph.
Class A shares of a Fund may also be purchased without a sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies. Additional
information on reductions or waivers may be obtained from IMDI at the address
listed on the cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B AND CLASS C SHARES
Class B and Class C shares are offered at NAV per share without a front end
sales charge. Class C shares redeemed within one year of purchase will be
subject to a CDSC of 1%, and Class B shares redeemed within six years of
purchase will be subject to a CDSC at the rates set forth below. This charge
will be assessed on an amount equal to the lesser of the current market value or
the original purchase cost of the shares being redeemed. Accordingly, you will
not be assessed a CDSC on increases in account value above the initial purchase
price, including shares derived from dividends or capital gains reinvested. In
determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the requisite maximum holding period or those you acquire through
reinvestment of dividends or capital gains, and next from the shares you have
held the longest during the requisite holding period.
Proceeds from the CDSC are paid to IMDI. The proceeds are used, in whole or
in part, to defray its expenses related to providing each Fund with distribution
services in connection with the sale of Class B and Class C shares, such as
compensating selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees makes it possible
for a Fund to sell Class B or Class C shares without deducting a sales charge at
the time of the purchase.
In the case of Class B shares, the amount of the CDSC, if any, will vary
depending on the number of years from the time you purchase your Class B shares
until the time you redeem them. Solely for purposes of determining this holding
period, any payments you make during the quarter will be aggregated and deemed
to have been made on the last day of the quarter. In the case of Class C shares,
solely for purposes of determining this holding period, any purchases you make
during a month will be deemed to have been made on the last day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
CLASS B SHARES AMOUNT SUBJECT TO
YEAR SINCE PURCHASE CHARGE
------------------- --------------------
<S> <C>
First......................................... 5%
Second........................................ 4%
Third......................................... 3%
Fourth........................................ 3%
Fifth......................................... 2%
Sixth......................................... 1%
Seventh and thereafter........................ 0%
</TABLE>
IMDI currently intends to pay to dealers a sales commission of 4% of the
sale price of Class B shares that they have sold, and will receive the entire
amount of the CDSC paid by shareholders on the redemption of Class B shares to
finance the 4% commission and related marketing expenses.
With respect to Class C shares, IMDI currently intends to pay to dealers a
sales commission of 1% of the sale price of Class C shares that they have sold,
a portion of which is to compensate the dealers for providing Class C
shareholder account services during the first year of investment. IMDI will
receive the entire amount of the CDSC paid by shareholders on the redemption of
Class C shares to finance the 1% commission and related marketing expenses.
30
<PAGE> 71
Pursuant to separate distribution plans for the Funds' Class B and Class C
shares, IMDI bears various promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons other than shareholders.
Under the Funds' Class B Plan, IMDI retains 0.75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and pays a continuing
service fee to qualified dealers at an annual rate of 0.25% of qualified
investments. Under the Class C Plan, IMDI pays continuing service/distribution
fees to qualified dealers at an annual rate of 1.00% of qualified investments
after the first year of investment (0.25% of which represents a service fee).
CONVERSION OF CLASS B SHARES: Your Class B shares and an appropriate
portion of both reinvested dividends and capital gains on those shares will be
converted into Class A shares automatically no later than the month following
eight years after the shares were purchased, resulting in lower annual
distribution fees. If you exchanged Class B shares into a Fund from Class B
shares of another Ivy fund, the calculation will be based on the time the shares
in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is waived for (i)
redemptions in connection with distributions not exceeding 12% annually of the
initial account balance (i.e., the value of the shareholder's Class B or Class C
Fund account at the time of the initial distribution) (ia) following retirement
under a tax qualified retirement plan, or (ib) upon attaining age 59 1/2 in the
case of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or
a Keogh Plan; (ii) redemption resulting from tax-free return of an excess
contribution to an IRA; or (iii) any partial or complete redemption following
the death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is named, provided
that the redemption is requested within one year of death or disability. IMDI
may require documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at its own expense,
pay concessions in addition to those described above to dealers that satisfy
certain criteria established from time to time by IMDI. These conditions relate
to increasing sales of shares of the Funds over specified periods and to certain
other factors. These payments may, depending on the dealer's satisfaction of the
required conditions, be periodic and may be up to (i) 0.25% of the value of Fund
shares sold by the dealer during a particular period, and (ii) 0.10% of the
value of Fund shares held by the dealer's customers for more than one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your registered securities
representative, by mail or by telephone. A CDSC may apply to certain Class A
share redemptions, to Class B shares redeemed within 6 years of purchase, and to
Class C shares that are redeemed within one year of purchase. All redemptions
are made at the NAV next determined after a redemption request has been received
in good order. Requests for redemptions must be received by 4:00 p.m. Eastern
time to be processed at the NAV for that day. Any redemption request in good
order that is received after 4:00 p.m. Eastern time will be processed at the
price determined on the following business day. If you own shares of more than
one class of a Fund, the Fund will redeem first the shares having the highest
12b-1 fees; any shares subject to a CDSC will be redeemed last unless you
specifically elect otherwise.
When shares are redeemed, a Fund will normally send redemption proceeds to
you on the next business day, but may take up to seven business days (or longer
in the case of shares recently purchased by check). Under unusual circumstances,
a Fund may suspend redemptions or postpone payment to the extent permitted by
Federal securities laws. The proceeds of the redemption may be more or less than
the purchase price of your shares, depending upon, among other factors, the
market value of the Fund's securities at the time of the redemption. If the
redemption is for over $50,000, or the proceeds are to be sent to an address
other than the address of record, or an address change has occurred in the last
30 days, it must be requested in writing with a signature guarantee. See
"Signature Guarantees," below.
If you are not certain of the requirements for a redemption, please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is responsible for
promptly transmitting redemption orders. Redemptions requested by dealers will
be made at the NAV (less any applicable CDSC) determined at the close of regular
trading (4:00 p.m. Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are considered to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the account registration, fund number,
the account number and the dollar amount or number of shares to be
redeemed.
- Signatures of all registered owners whose names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the case of estates,
trusts, guardianships, corporations, unincorporated associations,
retirement plan trustees or others acting in representative capacities).
The dollar amount or number of shares indicated for redemption must not
exceed the available shares or NAV of your account at the next-determined
prices. If your request exceeds these limits, then the trade will be rejected in
its entirety.
Mail your request to IMSC at one of the addresses on page 28 of this
Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per
day over the telephone by contacting IMSC at 1-800-777-6472. In times of unusual
economic or market changes, the telephone redemption privilege may be difficult
to implement. If you are unable to execute your transaction by telephone, you
may want to consider placing the order in writing and sending it by mail or
overnight courier.
Checks will be made payable to the current account registration and sent to
the address of record. If there has been a change of address in the last 30
days, please use the instructions for redemption requests by mail described
above. A signature guarantee would be required.
Requests for telephone redemptions will be accepted from the registered
owner of the account, the designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed by telephone.
If Section 6E of the Account Application is not completed, telephone
redemption privileges will be provided automatically. Although telephone
redemptions may be a convenient feature, you should realize that you may be
giving up a measure of security that you may otherwise have if you terminated
31
<PAGE> 72
the privilege and redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures that require personal identification
prior to acting on redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
Receiving Your Proceeds By Federal Funds Wire: For shareholders who
established this feature at the time they opened their account, telephone
instructions will be accepted for redemption of amounts up to $50,000 ($1,000
minimum) and proceeds will be wired on the next business day to a predesignated
bank account.
In order to add this feature to an existing account or to change existing
bank account information, please submit a letter of instructions including your
bank information to IMSC at the address provided above. The letter must be
signed by all registered owners, and their signatures must be guaranteed.
Your account will be charged a fee of $10 each time redemption proceeds are
wired to your bank. Your bank may also charge you a fee for receiving a Federal
Funds wire.
Neither IMSC nor any of the Funds can be responsible for the efficiency of
the Federal Funds wire system or the shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and subject to state law
requirements, a Fund may redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000 for more than 12 months.
A Fund will not redeem an account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do so. No redemption will be
made if a shareholder's account falls below the minimum due to a reduction in
the value of the Fund's portfolio securities. This provision does not apply to
IRAs, other retirement accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions, we require a
signature guarantee in order to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank account (if this
option was not selected on your original application, or if you are
changing the bank wire information).
A signature guarantee may be obtained only from an eligible guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended. An eligible guarantor institution includes banks, brokers, dealers,
municipal securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. The
signature guarantee must not be qualified in any way. Notarizations from notary
publics are not the same as signature guarantees, and are not accepted.
Circumstances other than those described above may require a signature
guarantee. Please contact IMSC at 1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are
automatically reinvested at NAV in additional shares of the same class of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital gains are
automatically invested at NAV in another Ivy fund of the same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in
cash. Capital gains will be reinvested at NAV in additional shares of the same
class of a Fund or another Ivy fund of the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will
be paid in cash.
If you wish to have your cash distributions deposited directly to your bank
account via electronic funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address other than the
address of record, you must provide IMSC with a letter of instruction signed by
all registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal backup withholding
tax on dividends, capital gains distributions and redemption proceeds, you must
furnish a Fund with your certified tax identification number ("TIN") and certify
that you are not subject to backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a certified TIN, or
such other tax-related certifications as a Fund may require, within 30 days of
opening your new account, each Fund reserves the right to involuntarily redeem
your account and send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by correctly
furnishing your TIN, and making certain certifications, in Section 2 of the
Account Application at the time you open your new account, unless the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt from backup
withholding. Please complete IRS Form W-9 with the new account application to
claim this exemption. If the registration is for an UGMA/UTMA account, please
provide the social security number of the minor. Alien individuals must furnish
their individual TIN on a completed IRS Form W-9. Other non-U.S. investors who
are not required to have a TIN must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions, most
shareholders elect not to receive certificates. Should you wish to have a
certificate issued, please contact IMSC at 1-800-777-6472 and request that one
be sent to you. (Retirement plan accounts are not eligible for this service.)
Please note that if you were to lose your certificate, you would incur an
expense to replace it.
32
<PAGE> 73
Certificates requested by telephone for shares valued up to $50,000 will be
issued to the current registration and mailed to the address of record. Should
you wish to have your certificates mailed to a different address, or registered
differently from the current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of a Fund have an exchange privilege with other Ivy funds
(except Ivy International Fund unless they have an existing Ivy International
Fund account). The Funds reserve the right to reject any exchange order.
Class A shareholders may exchange their outstanding Class A shares for Class
A shares of another Ivy fund on the basis of the relative NAV per Class A share,
plus an amount equal to the difference between the sales charge previously paid
on the outstanding Class A shares and the sales charge payable at the time of
the exchange on the new Class A shares. Incremental sales charges are waived for
outstanding Class A shares that have been invested for 12 months or longer.
Class B (and Class C) shareholders may exchange their outstanding Class B
(or Class C) shares for Class B (or Class C) shares of another Ivy fund on the
basis of the relative NAV per Class B (or Class C) share, without the payment of
any CDSC that would otherwise be due upon the redemption of Class B (or Class C)
shares. Class B shareholders who exercise the exchange privilege would continue
to be subject to the original Fund's CDSC schedule (or period) following an
exchange if such schedule is higher (or longer) than the CDSC for the new Class
B shares.
Class I shareholders may exchange their outstanding Class I shares for Class
I shares of another Ivy fund on the basis of the relative NAV per Class I share.
Exchanges from any class of Fund shares into an Ivy fund in which shares are not
already held are subject to certain minimum investment restrictions. See
"Exchange of Shares" in the SAI or contact IMSC at 1-800-777-6472 for further
details.
Shares resulting from the reinvestment of dividends and other distributions
will not be charged an initial sales charge or a CDSC when exchanged into
another Ivy fund.
Exchanges are considered to be taxable events, and may result in a capital
gain or a capital loss for tax purposes. Before executing an exchange, you
should obtain and read the Prospectus and consider the investment objective of
the fund to be purchased. Share certificates must be unissued (i.e., held by a
Fund) in order to execute a telephone exchange. Exchanges are available only in
states where they can be legally made. The Funds reserve the right to limit the
frequency of exchanges. Exchanges are accepted only if the registrations of the
two accounts are identical. Amounts to be exchanged must meet minimum investment
requirements for the Ivy fund into which the exchange is made. It is the policy
of the Funds to discourage the use of the exchange privilege for the purpose of
timing short-term market fluctuations. To protect the interests of other
shareholders of a Fund, a Fund may cancel the exchange privileges of any persons
that, in the opinion of the Fund, are using market timing strategies or are
making more than five exchanges per owner or controlling person per calendar
year.
With respect to shares subject to a CDSC, if less than all of an investment
is exchanged out of a Fund, the shares exchanged will reflect, pro rata, the
cost, capital appreciation and/or reinvestment of distributions of the original
investment as well as the original purchase date, for purposes of calculating
any CDSC for future redemptions of the exchanged shares.
Investors who held Ivy Fund shares as of December 31, 1991, or who held
shares of certain funds that were reorganized into an Ivy fund, may be exempt
from sales charges on the exchange of shares between any of the Ivy funds. If
you believe you may be eligible for such an exemption, please contact IMSC at
1-800-235-3322 for additional information.
In calculating the sales charge assessed on an exchange, shareholders will
be allowed to use the Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not
completed, telephone exchange privileges will be provided automatically for
accounts qualifying for this option. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up a measure of
security that you may otherwise have if you terminated the privilege and
exchanged your shares in writing. If you do not wish to make telephone exchanges
or let your registered representative do so on your behalf, you must notify IMSC
in writing.
In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have
the account number of your current fund and the exact name in which it is
registered available to give to the telephone representative.
Each Fund employs reasonable procedures that require personal identification
prior to acting on exchange instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and provide the
following information:
- - The name and class of the fund whose shares you currently own.
- - Your account number.
- - The name(s) in which the account is registered.
- - The name of the fund in which you wish your exchange to be invested.
- - The number of shares or the dollar amount you wish to exchange.
The request must be signed by all registered owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of a Fund have a one-time
privilege of reinvesting all or a part of the proceeds of the redemption back
into Class A shares of that Fund at NAV (without a sales charge) within 60 days
after the date of redemption. IN ORDER TO REINVEST WITHOUT A SALES CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT. The tax status of a gain
realized on a redemption generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption generally may be
disallowed by the IRS if the reinvestment privilege is exercised within 30 days
after the redemption. In addition, upon a reinvestment, the shareholder may not
be permitted to take into account sales charges incurred on the original
purchase of shares in computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by completing the
Account Application, which is attached to this Prospectus. You can also obtain
this application by contacting your registered representative or IMSC at
1-800-777-6472. To be eligible, you must maintain an account balance of at least
$5,000. Payments (minimum distribution amount -- $50) from your account can be
made monthly, quarterly, semi-annually, annually or on a selected monthly basis,
to yourself or any other designated payee. You may
33
<PAGE> 74
elect to have your systematic withdrawal paid directly to your bank account via
EFT, at no charge. Share certificates must be unissued (i.e., held by a Fund)
while the plan is in effect. A Systematic Withdrawal Plan may not be established
if you are currently participating in the Automatic Investment Method. For more
information, please contact IMSC at 1-800-777-6472.
Amounts paid to you through the Systematic Withdrawal Plan are derived from
the redemption of shares in your account. Any applicable CDSC will be assessed
upon the redemptions. A CDSC will not be assessed on withdrawals not exceeding
12% annually of the initial account balance when the Systematic Withdrawal Plan
was started.
If payments you receive through the Systematic Withdrawal Plan exceed the
dividends and capital appreciation of your account, you will be reducing the
value of your account. Additional investments made by shareholders participating
in the Systematic Withdrawal Plan must equal at least $1,000 while the plan is
in effect. However, it may not be advantageous to purchase additional shares
when you have a Systematic Withdrawal Plan, because you may be subject to an
initial sales charge on your purchase of Class A shares or to a CDSC imposed on
your redemptions of Class B or Class C shares. In addition, redemptions are
taxable events.
Should you wish at any time to add a Systematic Withdrawal Plan to an
existing account or change payee instructions, you will need to submit a written
request, signed by all registered owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares by completing Sections 6A and 7B of the
Account Application. Attach a "voided" check to your account application. At
pre-specified intervals, your bank account will be debited and the proceeds will
be credited to your Ivy Fund account. The minimum investment under this plan is
$50 per month ($25 per month for retirement plans). There is no charge to you
for this program.
You may terminate or suspend your Automatic Investment Method by telephone
at any time by contacting IMSC at 1-800-777-6472.
If you have investments being withdrawn from a bank account and we are
notified that the account has been closed, your Automatic Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy fund accounts having the same taxpayer
I.D. number will receive a single quarterly account statement, unless otherwise
specified. This feature consolidates the activity for each account onto one
statement. Requests for quarterly consolidated statements for all other accounts
must be submitted in writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy funds offer several tax-sheltered retirement plans that may fit your
needs:
- Traditional and Roth IRAs
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans are $25.
Investors Bank & Trust, which serves as custodian or trustee under the
retirement plan prototypes available from each Fund, charges certain nominal
fees for annual maintenance. A portion of these fees is remitted to IMSC as
compensation for its services to the retirement plan accounts maintained with
each Fund.
Distributions from retirement plans are subject to certain requirements
under the Code. Certain documentation, including IRS Form W4-P, must be provided
to IMSC prior to taking any distribution. Please contact IMSC for details. The
Ivy funds and IMSC assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws, and will not be responsible for
any penalties assessed. For additional information, please contact your broker,
tax adviser or IMSC.
Please call IMSC at 1-800-777-6472 for complete information kits describing
the plans, their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be directed to IMSC at 1-800-777-6472.
34
<PAGE> 75
ACCOUNT APPLICATION
<TABLE>
<S> <C> <C>
IVY ASIA PACIFIC FUND IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY CANADA FUND IVY INTERNATIONAL FUND II
IVY CHINA REGION FUND IVY INTERNATIONAL SMALL COMPANIES FUND
IVY DEVELOPING NATIONS FUND IVY PAN-EUROPE FUND
IVY GLOBAL FUND IVY SOUTH AMERICA FUND ------------------------
ACCOUNT NUMBER
IVY GLOBAL NATURAL RESOURCES FUND
</TABLE>
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for which Ivy is
custodian.)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
FUND 101/ 1 / 2 1 / 2
USE ------------------- ---------- ---------- ---------- ---------- ---------- ----------
ONLY Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd
=============================================================================================================================
FUND 0 / 1 0 / X
USE ---------- ----------
ONLY Exc Cd Red Cd
==============================================================================================================================
1 REGISTRATION
[ ] Individual
[ ] Joint Tenant ----------------------------------------------------------------------------------------
[ ] Estate Owner, Custodian or Trustee
[ ] UGMA/UTMA ----------------------------------------------------------------------------------------
[ ] Corporation Co-owner or Minor
[ ] Partnership ----------------------------------------------------------------------------------------
[ ] Sole Proprietor Minor's State of Residence
[ ] Trust ----------------------------------------------------------------------------------------
--------------------- Street
Date of Trust
[ ] Other ------------ -----------------------------------------------------------------------------------------
--------------------- City State Zip Code
- -
------------------------------
Phone Number -- Day
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -
- -----------------------------------
Phone Number -- Evening
- -----------------------------------
- ----------------------------------------------------------------------------------------------------------
2 TAX ID #
- - or -
--------------------------- -------------------------
Social Security Number Tax Identification Number
- ----------------------------------------------------------------------------------------------------------
2 TAX ID # Citizenship: [ ] U.S. [ ] Other
UNDER PENALTIES OF PERJURY, I CERTIFY BY SIGNING IN SECTION 8 BELOW THAT: (1) THE NUMBER SHOWN IN
THIS SECTION IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (TIN), AND (2) I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: (A) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (B)
THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (CROSS OUT ITEM (2) IF
YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.) PLEASE SEE THE "TAX IDENTIFICATION
NUMBER" SECTION OF THE PROSPECTUS FOR ADDITIONAL INFORMATION ON COMPLETING THIS SECTION.
- ------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature and
legal capacity of the Shareholder, and agrees to notify IMSC
of any purchases made under a Letter of Intent or Rights of
Accumulation.
------------------------------------------------------------
Dealer Name
------------------------------------------------------------
Branch Office Address
------------------------------------------------------------
City State Zip Code
- -----------------------------------------------------------------------
- -
Representative's Name and Number
------------------------------------------------------------ -----------------------------------------------------------
- -
Representative's Phone Number
------------------------------------------------------------ -----------------------------------------------------------
- -
Authorized Signature of Dealer
- -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 INVESTMENTS
A. Enclosed is my check for $ ---------------($1,000 minimum)
made payable to the appropriate Fund.*
B. Please invest in [ ] Class A shares [ ] Class B shares
[ ] Class C shares [ ] Class I shares ("**" Funds only) of
the following Fund(s):
$ --------------- Ivy Asia Pacific Fund
$ --------------- Ivy Global Science & Technology Fund**
$ --------------- Ivy Canada Fund
$ --------------- Ivy International Fund II**
$ --------------- Ivy China Region Fund
$ --------------- Ivy International Small Companies Fund**
$ --------------- Ivy Developing Nations Fund
$ --------------- Ivy Pan-Europe Fund
$ --------------- Ivy Global Fund
$ --------------- Ivy South America Fund
$ --------------- Ivy Global Natural Resources Fund
--------------- Other: ---------
C. I qualify for a reduced sales charge due to the following
privilege (applies only to Class A shares):
[ ] New Letter of Intent (if ROA or 90-day backdate
privilege is applicable, provide account(s) information
below.)
[ ] ROA with the account(s) listed below.
[ ] Existing Letter of Intent with account(s) listed below.
------------------------------------ -------------------------
Fund Name Account Number [ ] or New
------------------------------------ ------------------------- [ ] or New
Fund Name Account Number
If establishing a Letter of Intent, you will need to purchase Class A shares
over a thirteen-month period in accordance with the provisions in the
Prospectus. The aggregate
amount of these purchases will be at least equal to the amount indicated below
(see Prospectus for minimum amount required for reduced sales charges).
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000
D. FOR DEALER USE ONLY
Confirmed trade orders:
-------------- --------------- ------- -- -----------
Confirm Number Number of Shares Trade Date
* If investing in more than one Fund, make your check payable to "Ivy
Funds."
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional
shares of the same class in this account at net asset value unless a
different option is checked below.
A. [ ] Reinvest all dividends and capital gains into additional shares
of the same class of a different Ivy fund.
---------------------------------------------- ----------------------------------- [ ] New Account
Fund Name Account Number
B. [ ] Pay all dividends in cash and reinvest capital gains into
additional shares of the same class of this Fund, or in a
different Ivy Fund.
---------------------------------------------- ----------------------------------- [ ] New Account
Fund Name Account Number
C. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ] (By Mail)
7B [ ] (By E.F.T.)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 76
6 OPTIONAL SPECIAL FEATURES
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
<TABLE>
<CAPTION>
<S> <C>
I wish to invest: My bank account will be debited on or about the:
[ ] Annually _________________ day of the month of ___________
[ ] Semi-Annually _________________ day of the months of __________ and __________
[ ] Quarterly _________________ day of the [ ] first month of each calendar quarter
[ ] second
[ ] third
[ ] Monthly
[ ] once per month ________ day of the month*
[ ] twice ________ day of the month*
[ ] 3 times ________ day of the month*
[ ] 4 times ________ day of the month*
Please invest $ ________________ each period starting in the month of __________ in [ ] Class A [ ] Class B
Dollar Amount Month
or [ ] Class C of ___________________.
Fund Name
[ ] I have attached a voided check to ensure my correct bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS**
I wish to automatically withdraw funds from my
account in [ ] Class A [ ] Class B or [ ] Class C of _______________ I request the distribution be:
[ ] Monthly Fund Name [ ] Sent to the address listed in the registration.
[ ] Once [ ] Twice [ ] 3 times [ ] 4 times per month [ ] Sent to the special payee listed in Section 7.
[ ] Quarterly [ ] Invested into additional shares of the same
[ ] Semi-Annually class of a different Ivy fund: _____________
[ ] Annually Fund Name
-------------------------
Account Number
Amount $ ---------------, starting on or about the ________ day of __________________________
Minimum $50 month
________ day of __________________________
month
________ day of __________________________
month*
NOTE: Account minimum: $5,000 in shares at current offering price
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the
redemption of Fund shares up to $50,000. Proceeds may be wire
transferred to the bank account designated ($1,000 minimum).
(COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES** [ ] YES [ ] NO
I authorize exchanges by telephone among the Ivy family of
funds, upon instructions from any person as more fully
described in the Prospectus. To change this option once
established, written instructions must be received from the
shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS** [ ] YES [ ] NO
The Fund or its agents are authorized to honor telephone
instructions from any person as more fully described in the
Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be
payable to the shareholder of record and mailed to the address
of record. To change this option once established, written
instructions must be received from the shareholder of record or
the current registered representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
* There must be a period of at least seven calendar days between each
investment/withdrawal period.
** This option may not be selected if shares are issued in certificate
form.
7 SPECIAL PAYEE
A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION
Please send all disbursements to this
special payee ____________________________________________________________
Financial Institution
__________________________________________
Name of Bank or Individual
__________________________________________ ABA # Account
Account Number (if applicable) #
__________________________________________ ____________________________________________________________
Street Street
__________________________________________ ____________________________________________________________
City/State/Zip City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that failure to check "No" under Section 6D
or 6E above means that the Telephone Exchange/Redemptions Privileges
will be provided. The Funds employ reasonable procedures that require
personal identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent
telephone instructions. Please see "Exchange Privilege" and "How to
Redeem Shares" in the Prospectus for more information on these
privileges.
I certify to my legal capacity to purchase or redeem shares of the
Fund for my own account or for the account of the organization named
in Section 1. I have received a current Prospectus and understand its
terms are incorporated in this application by reference. I am
certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
----------------------------------------------------------------------------------------------------------
Signature of Owner, Custodian, Trustee or Corporate Officer Date
-----------------------------------------------------------------------------------------------------------
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
</TABLE>
01INTLX0498 (Remember to Sign Section 8)
<PAGE> 77
April 30, 1998 IVY FUNDS(R)
IVY
INTERNATIONAL
EQUITY
FUNDS
ADVISOR
CLASS SHARES
- -----------------
PROSPECTUS
- -----------------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ARTWORK]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Ivy Fund (the "Trust") is a registered investment company currently
consisting of eighteen separate portfolios. The Advisor Class shares of eleven
of these portfolios, as identified below (the "Funds"), are described in this
Prospectus. The Funds' Class A, Class B, Class C and Class I shares (if
applicable) are described in a separate prospectus dated April 30, 1998. Each
Fund has its own investment objective and policies, and your interest is limited
to the Fund in which you own Advisor Class shares.
The eleven Funds are:
Ivy Asia Pacific Fund
Ivy Canada Fund
Ivy China Region Fund
Ivy Developing Nations Fund
Ivy Global Fund
Ivy Global Natural Resources Fund
Ivy Global Science & Technology Fund
Ivy International Fund II
Ivy International Small Companies Fund
Ivy Pan-Europe Fund
Ivy South America Fund
This Prospectus sets forth concisely the information about the Funds'
Advisor Class shares that a prospective investor should know before investing.
Please read it carefully and retain it for future reference. Additional
information about the Funds is contained in the Statement of Additional
Information for the Funds' Advisor Class shares dated April 30, 1998 (the
"SAI"), which has been filed with the Securities and Exchange Commission ("SEC")
and is incorporated by reference into this Prospectus. The SAI and the
prospectus for the Funds' other classes of shares are available upon request and
without charge from the Trust at the Distributor's address and telephone number
below. The SEC maintains a web site (http://www.sec.gov) that contains the SAI
and other material incorporated by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Information............................. 2
The Funds' Financial Highlights................. 2
Investment Objectives and Policies.............. 3
Risk Factors and Investment Techniques.......... 8
Organization and Management of the Funds........ 12
Investment Manager.............................. 12
Fund Administration and Accounting.............. 14
Transfer Agent.................................. 14
Dividends and Taxes............................. 14
Performance Data................................ 14
How to Buy Shares............................... 15
How Your Purchase Price is Determined........... 15
How Each Fund Values its Shares................. 15
How to Redeem Shares............................ 16
Minimum Account Balance Requirements............ 17
Signature Guarantees............................ 17
Choosing a Distribution Option.................. 17
Tax Identification Number....................... 17
Certificates.................................... 17
Exchange Privilege.............................. 17
Systematic Withdrawal Plan...................... 18
Automatic Investment Method..................... 18
Consolidated Account Statements................. 18
Retirement Plans................................ 18
Shareholder Inquires............................ 18
Account Application............................. 19
</TABLE>
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Chairman Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Keith J. Carlson, President Services Corp. 700 South Federal Highway
Keith J. Carlson James W. Broadfoot, Vice President P.O. Box 3022 Boca Raton, FL 33432
Stanley Channick C. William Ferris, Boca Raton, FL 33431-0922 1-800-456-5111
Frank W. DeFriece, Jr. Secretary/Treasurer 1-800-777-6472
Roy J. Glauber DISTRIBUTOR
Michael G. Landry LEGAL COUNSEL AUDITORS Ivy Mackenzie
Joseph G. Rosenthal Dechert Price & Rhoads Coopers & Lybrand L.L.P. Distributors, Inc.
Richard N. Silverman Boston, MA Ft. Lauderdale, FL Via Mizner Financial Plaza
J. Brendan Swan 700 South Federal Highway
CUSTODIAN Boca Raton, FL 33432
Brown Brothers Harriman & Co. 1-800-456-5111
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 78
EXPENSE INFORMATION
The tables and examples below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. The inception date for each Fund's Advisor Class shares
is January 1, 1998. Therefore, the estimates presented are based on amounts
incurred by each Fund's Class A shares during the fiscal year ended December 31,
1997, unless otherwise noted.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MAXIMUM SALES LOAD MAXIMUM CONTINGENT
IMPOSED ON PURCHASES DEFERRED SALES CHARGE
(AS A % OF (AS A % OF ORIGINAL
OFFERING PRICE) PURCHASE PRICE)
-------------------- ---------------------
<S> <C> <C>
All Funds................................................... None None
</TABLE>
None of the Funds charge a redemption fee, an exchange fee, or a sales load
on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
12B-1 SERVICE/ TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES FEES EXPENSES EXPENSES(3)
---------- -------------- -------- -----------
<S> <C> <C> <C> <C>
Ivy Canada Fund................................ 0.85% None 1.64% 2.49%
Ivy Global Fund................................ 1.00% None 0.82% 1.82%
Ivy Global Natural Resources Fund.............. 0.22%(1) None 1.63% 1.85%
Ivy Global Science & Technology Fund........... 1.00% None 0.86% 1.86%
Ivy International Fund II...................... 0.73%(1) None 0.82% 1.55%
Ivy Pan-Europe Fund............................ 0.00%(1) None 1.95%(2) 1.95%
</TABLE>
<TABLE>
<CAPTION>
12B-1 SERVICE/ GROSS FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES(1) FEES EXPENSES(4) EXPENSES(4)
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Ivy Asia Pacific Fund.......................... 0.00% None 1.86%(2) 1.86%
Ivy China Region Fund.......................... 0.93% None 1.26% 2.19%
Ivy Developing Nations Fund.................... 0.92% None 1.14% 2.06%
Ivy International Small Companies Fund......... 0.00% None 2.25%(2) 2.25%
Ivy South America Fund......................... 0.27% None 1.93% 2.20%
<CAPTION>
TOTAL FUND
OPERATING
CUSTODY FEE CREDITS EXPENSES(3)
------------------- -----------
<S> <C> <C>
Ivy Asia Pacific Fund.......................... 0.20% 1.66%
Ivy China Region Fund.......................... 0.24% 1.95%
Ivy Developing Nations Fund.................... 0.12% 1.94%
Ivy International Small Companies Fund......... 0.39% 1.86%
Ivy South America Fund......................... 0.27% 1.93%
</TABLE>
- ---------------
(1) After fee reimbursements (see note 4 below). Without fee reimbursements,
Management Fees would have been 1.00%.
(2) After expense reimbursements (see note 4 below). Without expense
reimbursements, Other Expenses would have increased 8.06% for Ivy Asia
Pacific Fund, 2.37% for Ivy International Small Companies Fund, and 26.21%
for Ivy Pan-Europe Fund.
(3) Ivy Management, Inc. ("IMI") currently limits Total Fund Operating Expenses
(excluding Rule 12b-1 fees and certain other items, and net of any custody
fee credits) for all Funds except Ivy Canada Fund to an annual rate of 1.95%
(1.50% in the case of Ivy International Fund II) of each Fund's average net
assets.
(4) Does not reflect custody fee credits generated by uninvested cash balances
maintained by the Funds with their custodian.
EXAMPLES
The following table lists the expenses an investor would pay on a $1,000
investment in a Fund's Advisor Class shares, assuming (1) 5% annual return and
(2) unless otherwise noted, redemption at the end of each time period. These
examples further assume reinvestment of all dividends and distributions, and
that the percentage amounts under "Total Fund Operating Expenses" or "Gross
Operating Expenses", if the fund received custody fee credits, above, remain the
same each year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ivy Asia Pacific Fund....................................... $19 $ 58 $101 $218
Ivy Canada Fund............................................. $25 $ 78 $133 $283
Ivy China Region Fund....................................... $22 $ 69 $117 $252
Ivy Developing Nations Fund................................. $21 $ 65 $111 $239
Ivy Global Fund............................................. $18 $ 57 $ 99 $214
Ivy Global Natural Resources Fund........................... $19 $ 58 $100 $217
Ivy Global Science & Technology Fund........................ $19 $ 58 $101 $218
Ivy International Fund II................................... $16 $ 49 $ 84 $185
Ivy International Small Companies Fund...................... $23 $ 70 $120 $258
Ivy Pan-Europe Fund......................................... $22 $ 61 $105 $227
Ivy South America Fund...................................... $22 $ 69 $118 $253
</TABLE>
- ---------------
The information presented in the table does not reflect the charge of $10 per
transaction that would apply if a shareholder elects to have redemption proceeds
wired to his or her bank account. For a more detailed discussion of the Funds'
fees and expenses, see the following sections of this Prospectus: "Investment
Manager" and "Fund Administration and Accounting," and "Investment Advisory and
Other Services" in the SAI.
THE FUNDS' FINANCIAL HIGHLIGHTS
The inception date for the Funds' Advisor Class shares is January 1, 1998.
Accordingly, no financial information for these shares is presented. The
accounting firm of Coopers & Lybrand L.L.P. will be responsible for auditing
financial information relating to the Funds' Advisor Class shares. Financial
highlights for the Funds' Class A, Class B and Class C shares (and the Class I
shares of Ivy Global Science & Technology Fund, Ivy International Fund II and
Ivy International Small Companies Fund) are contained in a separate Prospectus
dated April 30, 1998. The Funds' Annual Reports are incorporated by reference
into the SAI, and are available upon request from the Funds' transfer agent
(1-800-777-6472).
2
<PAGE> 79
INVESTMENT OBJECTIVE AND POLICIES
Each Fund has its own investment objective and policies, which are described
below. Each Fund's investment objective is fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for a Fund's investment objective and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental, and may be
changed by the Board of Trustees of the Trust ("Trustees") without shareholder
approval. There can be no assurance that a Fund's objective will be met. The
different types of securities and investment techniques used by the Funds
involve varying degrees of risk. For information about the particular risks
associated with each type of investment, see "Risk Factors and Investment
Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction of a Fund described
in this Prospectus or in the SAI states a maximum percentage of assets that may
be invested in a security or other asset or describes a policy regarding quality
standards, that percentage limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes place. Thus,
for example, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage that results from circumstances
not involving any affirmative action by the Fund will not be considered a
violation.
IVY ASIA PACIFIC FUND: The Fund's principal investment objective is long-
term growth. Consideration of current income is secondary to this principal
objective. Under normal circumstances the Fund invests at least 65% of its total
assets in securities issued in Asia-Pacific countries, which for purposes of
this Prospectus are defined to include China, Hong Kong, India, Indonesia,
Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, South Korea, Taiwan,
Thailand and Vietnam. Securities of Asia-Pacific issuers include: (a) securities
of companies organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific region; (b)
securities that are issued or guaranteed by the government of an Asia-Pacific
country, its agencies or instrumentalities, political subdivisions or the
country's central bank; (c) securities of a company, wherever organized, where
at least 50% of the company's non-current assets, capitalization, gross revenue
or profit in any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in the
Asia-Pacific region; and (d) any of the preceding types of securities in the
form of depository shares.
The Fund may participate in markets throughout the Asia-Pacific region, and
it is expected that the Fund will be invested at all times in at least three
Asia-Pacific countries. The Fund does not expect to concentrate its investments
in any particular industry. See Appendix B to the SAI for further information
about the economic characteristics of certain Asia-Pacific countries.
The Fund may invest up to 35% of its assets in investment grade debt
securities of government or corporate issuers in emerging market countries,
equity securities and investment grade debt securities of issuers in developed
countries (including the United States), warrants, and cash or cash equivalents,
such as bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limit in such
instruments. The Fund may also invest up to 5% of its net assets in zero coupon
bonds, and in debt securities rated Ba or below by Moody's Investors Service,
Inc. ("Moody's") or BB or below by Standard and Poor's Corporation ("S&P"), or
if unrated, are considered by IMI to be of comparable quality (commonly referred
to as "high yield" or "junk" bonds). The Fund will not invest in debt securities
rated less than C by either Moody's or S&P. As of December 31, 1997, the Fund
held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts. The Fund may
also invest up to 10% of its total assets in other investment companies that
invest in securities issued in Asia-Pacific countries, and up to 15% of its net
assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index and foreign currency futures contracts, provided
that the Fund's equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY CANADA FUND: Ivy Canada Fund seeks long-term capital appreciation by
investing primarily in equity securities of Canadian companies. Canada is one of
the world's leading industrial countries and a major exporter of agricultural
products. The country is rich in natural resources such as zinc, uranium,
nickel, gold, silver, aluminum, iron and copper, and forest covers over 44% of
land areas, making Canada a leading world producer of newsprint. Canada is also
a major producer of hydroelectricity, oil and gas.
As a fundamental policy, the Fund normally invests at least 65% of its total
assets in Canadian equity securities (i.e., common and preferred stock,
securities convertible into common stock and common stock purchase warrants)
listed on Canadian stock exchanges or traded over-the-counter in Canada.
Canadian issuers are companies (i) organized under the laws of Canada, (ii) for
which the principal securities trading market is in Canada, (iii) which derive
at least 50% of their revenues or profits from goods produced or sold,
investments made or services performed in Canada, or (iv) which have at least
50% of their assets situated in Canada. The balance of the Fund's assets
ordinarily are invested in (i) bills and bonds of the Canadian Government and
the governments of the provinces or municipalities of Canada, (ii) high quality
notes and debentures of Canadian companies (i.e., those rated Aaa or Aa by
Moody's or AAA or AA by S&P, or if unrated, judged to be of comparable quality
by Mackenzie Financial Corporation ("MFC"), the Fund's Advisor), (iii) foreign
securities (including sponsored or unsponsored American Depository Receipts
("ADRs"), Global Depository Receipts ("GDRs"), American Depository Shares
("ADSs") and Global Depository Shares ("GDSs")), (iv) U.S. Government
securities, (v) equity securities and investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by MFC to be of comparable quality) of U.S. companies, and (vi) zero
coupon bonds that meet these credit quality standards.
The Fund may purchase securities on a "when-issued" or firm commitment
basis, engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies and up to 15% of its net assets in illiquid
securities. The Fund may not, as a matter of fundamental policy, invest more
than 5% of its total assets in restricted securities.
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For temporary defensive purposes, the Fund may invest without limit in U.S.
or Canadian dollar-denominated money market securities issued by entities
organized in the U.S. or Canada, such as (i) obligations issued or guaranteed by
the Canadian Government or the governments of the provinces or municipalities of
Canada (or their agencies or instrumentalities), (ii) finance company and
corporate commercial paper (and other short-term corporate obligations rated
Prime-1 by Moody's or A or better by S&P, or if unrated, considered by MFC to be
of comparable quality), (iii) obligations of banks (i.e., certificates of
deposit, time deposits and bankers' acceptances) considered creditworthy by MFC
under guidelines approved by the Trustees, and (iv) repurchase agreements with
broker-dealers and banks. For temporary or emergency purposes, the Fund may also
borrow up to 10% of the value of its total assets from banks.
IVY CHINA REGION FUND: Ivy China Region Fund's principal investment
objective is long-term capital growth. Consideration of current income is
secondary to this principal objective. The Fund seeks to meet its objective
primarily by investing in the equity securities of companies that are expected
to benefit from the economic development and growth of China, Hong Kong and
Taiwan. A significant percentage of the Fund's assets may also be invested in
the securities markets of South Korea, Singapore, Malaysia, Thailand, Indonesia
and the Philippines (collectively, with China, Hong Kong and Taiwan, the "China
Region").
The Fund normally invests at least 65% of its total assets in "Greater China
growth companies," defined as companies (a) that are organized in or for which
the principal securities trading markets are the China Region; (b) that have at
least 50% of their assets in one or more China Region countries or derive at
least 50% of their gross sales revenues or profits from providing goods or
services to or from within one or more China Region countries; or (c) that have
at least 35% of their assets in China, Hong Kong or Taiwan, derive at least 35%
of their gross sales revenues or profits from providing goods or services to or
from within these three countries, or have significant manufacturing or other
operations in these countries. IMI's determination as to whether a company
qualifies as a Greater China growth company is based primarily on information
contained in financial statements, reports, analyses and other pertinent
information (some of which may be obtained directly from the company). The Fund
may invest 25% or more of its total assets in the securities of issuers located
in any one China Region country, and currently expects to invest more than 50%
of its total assets in Hong Kong. See Appendix B to the SAI for further
information about the economic characteristics of certain China Region
countries.
The balance of the Fund's assets ordinarily are invested in (i) certain
investment-grade debt securities and (ii) the equity securities of "China Region
associated companies," which are companies that do not meet the definition of a
Greater China growth company, but whose current or expected performance, based
on certain identified factors (such as the growth trends in the location of a
company's assets and the sources of its revenues and profits), is judged by IMI
to be strongly associated with the China Region. The investment-grade debt
securities in which the Fund may invest include (a) obligations of the U.S.
Government or its agencies or instrumentalities, (b) obligations of U.S. banks
and other banks organized and existing under the laws of Hong Kong, Taiwan or
countries that are members of the Organization for Economic Cooperation and
Development ("OECD"), (c) obligations denominated in any currency issued by
international development institutions and Hong Kong, Taiwan and OECD member
governments and their agencies and instrumentalities, and (d) corporate bonds
rated Baa or higher by Moody's or BBB or higher by S&P (or if unrated, are
considered by IMI to be of comparable quality), as well as repurchase agreements
with respect to any of the foregoing instruments. The Fund may also invest in
zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or, if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund held no low-rated debt
securities.
The Fund may invest in sponsored or unsponsored ADRs, GDRs, ADSs and GDSs,
warrants, and securities issued on a "when-issued" or firm commitment basis, and
may engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies, and up to 15% of its net assets in
illiquid securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may reduce its position in Greater China growth
companies and Greater China associated companies and increase its investment in
cash and liquid debt securities, such as U.S. Government securities, bank
obligations, commercial paper, short-term notes and repurchase agreements. For
temporary or emergency purposes, the Fund may also borrow up to 10% of the value
of its total assets from banks.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its total assets.
IVY DEVELOPING NATIONS FUND: The Fund's principal objective is long-term
growth. Consideration of current income is secondary to this principal
objective. In pursuing its objective, the Fund invests primarily in the equity
securities of companies that IMI believes will benefit from the economic
development and growth of emerging markets. The Fund considers countries having
emerging markets to be those that (i) are generally considered to be
"developing" or "emerging" by the World Bank and the International Finance
Corporation, or (ii) are classified by the United Nations (or otherwise regarded
by their authorities) as "emerging." Under normal market conditions, the Fund
invests at least 65% of its total assets in equity securities (including common
and preferred stocks, convertible debt obligations, warrants, options (subject
to the restrictions set forth below), rights, and sponsored or unsponsored ADRs,
GDRs, ADSs and GDSs that are listed on stock exchanges or traded over-the-
counter) of "Emerging Market growth companies," which are defined as companies
(a) for which the principal securities trading market is an emerging market (as
defined above), (b) that (alone or on a consolidated basis) derives 50% or more
of its total revenue either from goods, sales or services in emerging markets,
or (c) that are organized under the laws of (and with a principal office in) an
emerging market country.
The Fund normally invests its assets in the securities of issuers located in
at least three emerging market countries, and may invest 25% or more of its
total assets in the securities of issuers located in any one country. IMI's
determination as to whether a company qualifies as an Emerging Market growth
company is based primarily on information contained in financial statements,
reports, analyses and other pertinent information (some of which may be obtained
directly from the company).
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<PAGE> 81
For purposes of capital appreciation, the Fund may invest up to 35% of its
total assets in (i) debt securities of government or corporate issuers in
emerging market countries, (ii) equity and debt securities of issuers in
developed countries (including the United States), and (iii) cash or cash
equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary defensive purposes, the Fund may invest without limit
in such instruments. The Fund may also invest in zero coupon bonds and purchase
securities on a "when-issued" or firm commitment basis.
The Fund will not invest more than 20% of its total assets in debt
securities rated Ba or lower by Moody's or BB or lower by S&P, or if unrated,
are considered by IMI to be of comparable quality (commonly referred to as "high
yield" or "junk" bonds). The Fund will not invest in debt securities rated less
than C by either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment
companies, and up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY GLOBAL FUND: The Fund seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and governments
of any nation. Any income realized will be incidental. Under normal conditions,
the Fund will invest at least 65% of its total assets in the common stock of
companies throughout the world, with at least three different countries (one of
which may be the United States) represented in the Fund's overall portfolio
holdings. Although the Fund generally invests in common stock, it may also
invest in preferred stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs,
and investment-grade debt securities (i.e., those rated Baa or higher by Moody's
or BBB or higher by S&P, or if unrated, are considered by IMI to be of
comparable quality), including corporate bonds, notes, debentures, convertible
bonds and zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund had 1.05% of its total assets
invested in low-rated debt securities.
The Fund may invest in equity real estate investment trusts, warrants, and
securities issued on a "when-issued" or firm commitment basis, and may engage in
foreign currency exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid securities. The
Fund may not, as a matter of fundamental policy, invest more than 5% of its
assets in restricted securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices, provided the
premium paid for such options does not exceed 10% of the Fund's net assets. The
Fund may also sell covered put options with respect to up to 50% of the value of
its net assets, and may write covered call options so long as not more than 20%
of the Fund's net assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in transactions in (and
options on) stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed 20% of its
total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment objective is
long-term growth. Any income realized will be incidental. Under normal
conditions, the Fund invests at least 65% of its total assets in the equity
securities of companies throughout the world that own, explore or develop
natural resources and other basic commodities, or supply goods and services to
such companies. Under this investment policy, at least three different countries
(one of which may be the United States) will be represented in the Fund's
overall portfolio holdings. "Natural resources" generally include precious
metals (such as gold, silver and platinum), ferrous and nonferrous metals (such
as iron, aluminum and copper), strategic metals (such as uranium and titanium),
coal, oil, natural gases, timber, undeveloped real property and agricultural
commodities. Although the Fund generally invests in common stock, it may also
invest in preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may also invest
directly in precious metals and other physical commodities.
MFC believes that certain political and economic changes in the global
environment in recent years have had and will continue to have a profound effect
on global supply and demand of natural resources, and that rising demand from
developing markets and new sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, MFC will seek to identify
securities of companies that, in MFC's opinion, appear to be undervalued
relative to the value of the companies' natural resource holdings.
For temporary defensive purposes, the Fund may invest without limit in cash
or cash equivalents, such as bank obligations (including certificates of deposit
and bankers' acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may borrow up to
one-third of the value of its total assets from banks, but may not purchase
securities at any time during which the value of the Fund's outstanding loans
exceeds 10% of the value of the Fund's total assets. The Fund may engage in
foreign currency exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid securities.
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<PAGE> 82
For hedging purposes only, the Fund may engage in transactions in (and
options on) foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's principal investment
objective is long-term capital growth. Any income realized will be incidental.
Under normal conditions, the Fund will invest at least 65% of its total assets
in the common stock of companies that are expected to benefit from the
development, advancement and use of science and technology. Under this
investment policy, at least three different countries (one of which may be the
United States) will be represented in the Fund's overall portfolio holdings.
Industries likely to be represented in the Fund's portfolio include computers
and peripheral products, software, electronic components and systems,
telecommunications, media and information services, pharmaceuticals, hospital
supply and medical devices, biotechnology, environmental services, chemicals and
synthetic materials, and defense and aerospace. The Fund may also invest in
companies that are expected to benefit indirectly from the commercialization of
technological and scientific advances. In recent years, rapid advances in these
industries have stimulated unprecedented growth. While this is no guarantee of
future performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs and investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by S&P, or if
unrated, are considered by IMI to be of comparable quality), including corporate
bonds, notes, debentures, convertible bonds and zero coupon bonds. The Fund may
also invest up to 5% of its net assets in debt securities that are rated Ba or
below by Moody's or BB or below by S&P, or if unrated, are considered by IMI to
be of comparable quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by either Moody's
or S&P. As of December 31, 1997, the Fund held no low-rated debt securities.
The Fund may invest in warrants, purchase securities on a "when-issued" or
firm commitment basis, engage in foreign currency exchange transactions and
enter into forward foreign currency contracts. The Fund may also invest (i) up
to 10% of its total assets in other investment companies and (ii) up to 15% of
its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices and on
individual securities, provided the premium paid for such options does not
exceed 10% of the value of the Fund's net assets. The Fund may also sell covered
put options with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the Fund's net assets
is subject to being purchased upon the exercise of the calls. For hedging
purposes only, the Fund may engage in transactions in (and options on) stock
index and foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 20% of the value of its
total assets.
IVY INTERNATIONAL FUND II: The Fund's principal objective is long-term
capital growth primarily through investment in equity securities. Consideration
of current income is secondary to this principal objective. It is anticipated
that at least 65% of the Fund's total assets will be invested in common stock
(and securities convertible into common stock) principally traded in European,
Pacific Basin and Latin American markets. Under this investment policy, at least
three different countries (other than the United States) will be represented in
the Fund's overall portfolio holdings. For temporary defensive purposes, the
Fund may also invest in equity securities principally traded in U.S. markets.
IMI, the Fund's investment manager, invests the Fund's assets in a variety of
economic sectors, industry segments and individual securities to reduce the
effects of price volatility in any one area and to enable shareholders to
participate in markets that do not necessarily move in concert with U.S.
markets. IMI seeks to identify rapidly expanding foreign economies, and then
searches out growing industries and corporations, focusing on companies with
established records. Individual securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength. Companies in which investments are made will generally have
at least $1 billion in capitalization and a solid history of operations.
When economic or market conditions warrants, the Fund may invest without
limit in U.S. Government securities, investment grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or if unrated,
considered by IMI to be of comparable quality), preferred stock, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or cash or cash equivalents
such as bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase agreements. For
temporary or emergency purposes, the Fund may borrow up to 10% of the value of
its total assets from banks. The Fund may also purchase securities on a
"when-issued" or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment companies
and up to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's principal investment
objective is long-term growth primarily through investment in foreign equity
securities. Consideration of current income is secondary to this principal
objective. Under normal circumstances the Fund invests at least 65% of its total
assets in common and preferred stocks (and securities convertible into common
stocks) of foreign issuers having total market capitalization of less than $1
billion. Under this investment policy, at least three different countries (other
than the United States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also invest in equity
securities principally traded in the United States. The Fund will invest its
assets in a variety of economic sectors, industry segments and individual
securities to reduce the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily move in concert
with the U.S.
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<PAGE> 83
market. The factors that IMI considers in determining the appropriate
distribution of investments among various countries and regions include
prospects for relative economic growth, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships.
In selecting the Fund's investments, IMI will seek to identify securities
that are attractively priced relative to their intrinsic value. The intrinsic
value of a particular security is analyzed by reference to characteristics such
as relative price-earnings ratio, dividend yield and other relevant factors
(such as applicable financial, tax, social and political conditions).
When economic or market conditions warrant, the Fund may invest without
limit in U.S. Government securities, investment grade debt securities, zero
coupon bonds, preferred stocks, warrants, or cash or cash equivalents such as
bank obligations (including certificates of deposit and bankers' acceptances),
commercial paper, short-term notes and repurchase agreements. The Fund may also
invest up to 5% of its net assets in debt securities rated Ba or below by
Moody's or BB or below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or "junk" bonds). The
Fund will not invest in debt securities rated less than C by either Moody's or
S&P. As of December 31, 1997, the Fund held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts. The Fund may
also invest up to 10% of its total assets in other investment companies and up
to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in stock index and foreign currency futures contracts, provided
that the Fund's equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment objective is long-
term capital growth. Consideration of current income is secondary to this
principal objective. The Fund seeks to achieve its investment objective by
investing primarily in the equity securities of companies domiciled or otherwise
doing business (as described below) in European countries. Under normal
circumstances, the Fund will invest at least 65% of its total assets in the
equity securities of "European companies," which include any issuer (a) that is
organized under the laws of a European country; (b) that derives 50% or more of
its total revenues from goods produced or sold, investments made or services
performed in Europe; or (c) for which the principal trading market is in Europe.
The Fund may also invest up to 35% of its total assets in the equity securities
of issuers domiciled outside of Europe. The equity securities in which the Fund
may invest include common stock, preferred stock and common stock equivalents
such as warrants and convertible debt securities. The Fund may also invest in
sponsored or unsponsored ADRs, European Depository Receipts ("EDRs"), GDRs,
ADSs, European Depository Shares ("EDSs") and GDSs. The Fund does not expect to
concentrate its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt securities, but will
not invest more than 20% of its net assets in debt securities rated Ba or below
by Moody's or BB or below by S&P or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or "junk" bonds.) The
Fund will not invest in debt securities rated less than C by either Moody's or
S&P. As of December 31, 1997, the Fund held no low-rated debt securities. The
Fund may also purchase securities on a "when-issued" or firm commitment basis,
engage in foreign currency exchange transactions and enter into forward foreign
currency contracts. In addition, the Fund may invest up to 5% of its net assets
in zero coupon bonds.
For temporary defensive purposes or when IMI believes that circumstances
warrant, the Fund may invest without limit in U.S. Government securities,
investment grade debt securities (i.e., those rated Baa or higher by Moody's or
BBB or higher by S&P, or if unrated, are considered by IMI to be of comparable
quality), warrants, and cash or cash equivalents such as domestic or foreign
bank obligations (including certificates of deposit, time deposits and bankers'
acceptances), short-term notes, repurchase agreements, and domestic or foreign
commercial paper (which, if issued by a corporation, must be rated Prime-1 by
Moody's or A-1 by S&P, or if unrated has been issued by a company that at the
time of investment has an outstanding debt issue rated Aaa or Aa by Moody's or
AAA or AA by S&P).
For temporary or emergency purposes, the Fund may borrow up to one-third of
the value of its total assets from banks, but may not purchase securities at any
time during which the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may also invest up to 10% of its
total assets in other investment companies, and up to 15% of its net assets in
illiquid securities.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets are subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
IVY SOUTH AMERICA FUND: The Fund's principal investment objective is
long-term capital growth. Consideration of current income is secondary to this
principal objective. Under normal conditions the Fund invests at least 65% of
its total assets in securities issued in South America. Securities of South
American issuers include (a) securities of companies organized under the laws of
a South American country or for which the principal securities trading market is
in South America; (b) securities that are issued or guaranteed by the government
of a South American country, its agencies or instrumentalities, political
subdivisions or the country's central bank; (c) securities of a company,
wherever organized, where at least 50% of the company's non-current assets,
capitalization, gross revenue or profit in any one of the two most recent fiscal
years represents (directly or indirectly through subsidiaries) assets or
activities located in South America; or (d) any of the preceding types of
securities in the form of depository shares. The Fund may participate, however,
in markets throughout Latin America, which for purposes of this Prospectus is
defined as Mexico, Central America, South America and the Spanish-speaking
islands of the Caribbean, and it is expected that the Fund will be invested at
all times in at least three countries. Under present conditions, the Fund
expects to focus its investments in Argentina, Brazil, Chile, Colombia, Peru and
Venezuela, which
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IMI believes are the most developed capital markets in South America. The Fund
does not expect to concentrate its investments in any particular industry.
The Fund's equity investments consist of common stock, preferred stock
(either convertible or non-convertible), sponsored or unsponsored ADRs, GDRs,
ADSs and GDSs, and warrants (any of which may be purchased through rights). The
Fund's equity securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market.
The Fund may invest in debt securities (including zero coupon bonds) when
IMI anticipates that the potential for capital appreciation from debt securities
is likely to equal or exceed that of equity securities (e.g., a favorable change
in relative foreign exchange rates, interest rate levels or the creditworthiness
of issuers). These include debt securities issued by South American Governments
("Sovereign Debt"). Most of the debt securities in which the Fund may invest are
not rated, and those that are rated are expected to be below investment grade
(i.e., rated Ba or below by Moody's or BB or below by S&P, or considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). As of December 31, 1997, the Fund held no low-rated debt securities.
To meet redemptions, or while the Fund is anticipating investments in South
American securities, the Fund may hold cash or cash equivalents such as bank
obligations (including certificates of deposit and bankers' acceptances),
commercial paper, short-term notes and repurchase agreements. For temporary
defensive or emergency purposes, the Fund may invest without limit in such
instruments, and borrow up to one-third of the value of its total assets from
banks (but may not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's total assets).
The Fund may purchase securities on a "when-issued" or firm commitment
basis, engage in foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest up to 10% of its total
assets in other investment companies, and up to 15% of its net assets in
illiquid securities. The Fund will treat as illiquid any South American
securities that are subject to restrictions on repatriation for more than seven
days, as well as any securities issued in connection with South American debt
conversion programs that are restricted to remittance of invested capital or
profits.
The Fund may purchase put and call options on securities and stock indices,
provided the premium paid for such options does not exceed 5% of the Fund's net
assets. The Fund may also sell covered put options with respect to up to 10% of
the value of its net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being purchased upon the
exercise of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency futures
contracts, provided that the Fund's equivalent exposure in such contracts does
not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATED TO IVY ASIA PACIFIC FUND: Certain Asia-
Pacific countries in which the Fund may invest are developing countries, and may
be in the initial stages of their industrialization cycle. The economic
structures of developing countries generally are less diverse and mature than in
the United States, and their political systems may be relatively unstable.
Historically, markets of developing countries have been more volatile than the
markets of developed countries, yet such markets often have provided higher
rates of return to investors.
Investing in securities of issuers in Asia-Pacific countries involves
certain considerations not typically associated with investing in securities of
United States companies, including (i) restrictions on foreign investment and on
repatriation of capital invested in Asian countries, (ii) currency fluctuations,
(iii) the cost of converting foreign currency into United States dollars, (iv)
potential price volatility and lesser liquidity of shares traded on Asia-
Pacific country securities markets and (v) political and economic risks,
including the risk of nationalization or expropriation of assets and the risk of
war.
Certain Asia-Pacific countries may be more vulnerable to the ebb and flow of
international trade and to trade barriers and other protectionist or retaliatory
measures. Investments in countries such as China that have recently opened their
capital markets and that appear to have relaxed their central planning
requirement, as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions in foreign markets in
general may be longer than in domestic markets, and such delays may be of
particular concern in developing countries. For example, the possibility of
political upheaval and the dependence on foreign economic assistance may be
greater in developing countries than in developed countries, either one of which
may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some Asia-Pacific
countries are subject to less regulatory scrutiny than in the United States. In
addition, due to the limited size of the markets for Asia-Pacific securities,
the prices for such securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which could cause a
decrease not only in the value but also in the liquidity of the Fund's
investments.
SPECIAL CONSIDERATIONS RELATED TO IVY CANADA FUND: The economy of Canada is
strongly influenced by the activities of companies involved in the production
and processing of natural resources, particularly those involved in the energy
industry, industrial materials (e.g., chemicals, base metals, timber and paper)
and agricultural materials (e.g., grain cereals). The securities of companies in
the energy industry are subject to changes in value and dividend yield, which
depend, to a large extent, on the price and supply of energy fuels. Rapid price
and supply fluctuations may be caused by events relating to international
politics, energy conservation and the success of exploration projects.
SPECIAL CONSIDERATIONS RELATED TO IVY CHINA REGION FUND: Investors should
realize that China Region countries may be subject to a greater degree of
economic, political and social instability than is the case in the United States
or other developed countries. Among the factors causing this instability are (i)
authoritarian governments or military involvement in political and economic
decision making, (ii) popular unrest associated with demands for improved
political, economic and social conditions, (iii) internal insurgencies, (iv)
hostile relations with neighboring countries, (v) ethnic, religious and racial
disaffection, and (vi) changes in trading status, any one of which could disrupt
the principal financial markets in which the Fund invests and adversely affect
the value of its assets. In addition, several China Region countries have had
hostile relations with neighboring nations. For example, China continues to
claim sovereignty over Taiwan, and has assumed sovereignty over Hong Kong.
China Region countries tend to be heavily dependent on international trade,
as a result of which their markets are highly sensitive to protective trade
barriers and the economic conditions of their principal trading partners (i.e.,
the United States, Japan and Western European countries). Protectionist trade
legislation, reduction of foreign investment in China Region economies and
general declines in the international securities markets could have a
significant
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adverse effect on the China Region securities markets. In addition, certain
China Region countries have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. There is a heightened risk in these countries that such adverse
actions might be repeated.
To take advantage of potential growth opportunities, the Fund might have
significant investments in companies with relatively small market
capitalization. Securities of smaller companies may be subject to more abrupt or
erratic market movements than the securities of larger more established
companies, both because they tend to be traded in lower volume and because the
companies are subject to greater business risk. In addition, to the extent that
any China Region country experiences rapid increases in its money supply or
investment in equity securities for speculative purposes, the equity securities
traded in such countries may trade at price-earning multiples higher than those
of comparable companies trading on securities markets in the United States,
which may not be sustainable. Finally, restrictions on foreign investment exists
to varying degrees in some China Region countries. Where such restrictions
apply, investments may be limited and may increase the Fund's expenses. The SAI
contains additional information concerning the risks associated with investing
in the China Region.
SPECIAL CONSIDERATIONS RELATED TO IVY DEVELOPING NATIONS FUND, IVY GLOBAL
SCIENCE & TECHNOLOGY FUND, AND IVY INTERNATIONAL SMALL COMPANIES FUND: In light
of Ivy Developing Nations Fund's concentration in equity securities of Emerging
Market growth companies (as defined above), an investment in the Fund should be
considered speculative. In addition, both Ivy Global Science & Technology Fund
and Ivy International Small Companies Fund are expected to have significant
investments in companies with relatively small market capitalizations.
Securities of smaller companies may be subject to more abrupt or erratic market
movements than the securities of larger more established companies, both because
they tend to be traded in lower volume and because the companies are subject to
greater business risk.
Because Ivy Global Science & Technology Fund normally focuses its
investments in science and technology-related industries, the value of the
Fund's shares may be more susceptible to factors affecting those industries and
to greater market fluctuation than a fund whose portfolio holdings are more
diverse. For example, rapid advances in these industries tend to render existing
products obsolete. In addition, many companies in which the Fund is likely to
invest are subject to government regulations and approval of their products and
services, which may affect their overall profitability and cause their stock
prices to be more volatile. In selecting the Fund's portfolio of investments,
IMI will consider each company's ability to create new products, secure any
necessary regulatory approvals, and generate sufficient customer demand. A
company's failure to perform well in any one of these areas, however, could
cause its stock to decline sharply.
SPECIAL CONSIDERATIONS RELATED TO IVY GLOBAL NATURAL RESOURCES FUND: Since
the Fund normally invests a substantial portion of its assets in securities of
companies engaged in natural resources activities, the Fund may be subject to
greater risks and market fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in response to
market conditions generally, and will be particularly sensitive to the markets
for those natural resources in which a particular issuer is involved. The values
of natural resources may also fluctuate directly with respect to real and
perceived inflationary trends and various political developments. In addition,
many natural resource companies have been subject to significant costs
associated with compliance with environmental and other safety regulations. In
selecting the Fund's portfolio of investments, IMI will consider each company's
ability to create new products, secure any necessary regulatory approvals, and
generate sufficient customer demand. A company's failure to perform well in any
one of these areas, however, could cause its stock to decline sharply.
To take advantage of potential growth opportunities, the Fund might have
significant investments in companies with relatively small market
capitalization. Securities of smaller companies may be subject to more abrupt or
erratic market movements than the securities of larger more established
companies because they tend to be traded in lower volume and because the
companies are subject to greater business risk.
The Fund's investments in precious metals (such as gold) and other physical
commodities are subject to special risk considerations, including substantial
price fluctuations over short periods of time. On the other hand, investments in
precious metals coins or bullion could help to moderate fluctuations in the
value of the Fund's portfolio, since the prices of precious metals have at times
tended not to fluctuate as widely as shares of issuers engaged in the mining of
precious metals. Because precious metals and other commodities do not generate
investment income, however, the return on such investments will be derived
solely from the appreciation and depreciation on such investments. The Fund may
also incur storage and other costs relating to its investments in precious
metals and other commodities, which may, under certain circumstances, exceed
custodial and brokerage costs associated with investments in other types of
securities. When the Fund purchases a precious metal, IMI currently intends that
it will only be in a form that is readily marketable.
SPECIAL CONSIDERATIONS RELATED TO IVY SOUTH AMERICA FUND: The securities
markets of Latin American countries are substantially smaller, less developed,
less liquid and more volatile than the major securities markets in the United
States. This could cause prices to be erratic for reasons apart from factors
that affect the quality of the securities. For example, limited market size may
cause prices to be unduly influenced by traders who control large positions.
Adverse publicity and investor perception, whether based on fundamental
analysis, may decrease the value and liquidity of portfolio securities,
especially in these markets.
For many years, most Latin American countries have experienced substantial
(and in some periods extremely high) rates of inflation, which have had and may
continue to have very negative effects on the economies and securities markets
of these countries. In addition, certain Latin American countries are among the
largest debtors to commercial banks and foreign governments, and some have
declared moratoria on the payment of principal and/or interest on external debt.
Accordingly, the Sovereign Debt instruments in which the Fund may invest involve
a high degree of risk and should be considered equivalent in quality to debt
securities rated below investment grade by Moody's and S&P.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and therefore may
invest, with respect to 50% of its total assets, more than 5% of its total
assets in the securities of any one issuer. Consequently, the performance of a
single issuer in which the Fund has invested may have a more significant effect
on the overall performance of the Fund than if the Fund were a diversified
company.
BANK OBLIGATIONS: The bank obligations in which the Funds may invest
include certificates of deposit, bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets in excess of $1 billion,
and (ii) other banks if the principal amount of the obligation is fully insured
by the Federal Deposit Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are limited to obligations of
Federal or state-
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chartered institutions whose total assets exceed $1 billion and whose deposits
are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on a Fund's net asset value
of any increase or decrease in the value of the Fund's portfolio securities.
Money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations,
and finance companies. Each Fund's investments in commercial paper are limited
to obligations rated Prime-1 by Moody's or A-1 by S&P, or if not rated, are
issued by companies having an outstanding debt issue currently rated Aaa or Aa
by Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible securities in which the Funds may
invest include corporate bonds, notes, debentures and other securities
convertible into common stocks. Because convertible securities can be converted
into equity securities, their values will normally vary in some proportion with
those of the underlying equity securities. Convertible securities usually
provide a higher yield than the underlying equity, however, so that the price
decline of a convertible security may sometimes be less substantial than that of
the underlying equity security.
DEBT SECURITIES, IN GENERAL: Investment in debt securities, including
municipal securities, involves both interest rate and credit risk. Generally,
the value of debt instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt securities
generally increases. Conversely, rising interest rates tend to cause the value
of debt securities to decrease. Bonds with longer maturities generally are more
volatile than bonds with shorter maturities. The market value of debt securities
also varies according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the increased risk that
the issuer will be unable to meet its obligations on interest or principal
payments at the time called for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates,
which are mortgage-backed securities). When such securities are held to
maturity, the payment of principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible credit quality.
U.S. Government securities that are not held to maturity are subject to
variations in market value caused by fluctuations in interest rates.
Mortgage-backed securities are securities representing part ownership of a
pool of mortgage loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the loans typically
will be substantially less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the security. Conversely, rising interest rates tend to
decrease the rate of prepayment, thereby lengthening the security's actual
average life (and increasing the security's price volatility). Since it is not
possible to predict accurately the average life of a particular pool, and
because prepayments are reinvested at current rates, mortgage-backed securities
may involve significantly greater price and yield volatility than traditional
debt securities.
INVESTMENT GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics).
LOW-RATED DEBT SECURITIES: Securities rated lower than Baa or BBB, and
comparable unrated securities (commonly referred to as "high yield" or "junk"
bonds), are considered by major credit-rating organizations to have
predominately speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal. Investors in those Funds that invest in
these securities should be aware of and willing to accept the special risks
associated with these securities.
While high yield debt securities are likely to have some quality and
protective characteristics, these qualities are largely outweighed by the risk
of exposure to adverse conditions and other uncertainties. Accordingly,
investments in such securities, while generally providing for greater income and
potential opportunity for gain than investments in higher-rated securities, also
entail greater risk (including the possibility of default or bankruptcy of the
issuer of such securities) and generally involve greater price volatility than
securities in higher rating categories. IMI seeks to reduce risk through
diversification (including investments in foreign securities), credit analysis
and attention to current developments and trends in both the economy and
financial markets. Should the rating of a portfolio security be downgraded, IMI
will determine whether it is in the affected Fund's best interest to retain or
dispose of the security (unless the security is downgraded below the rating of
C, in which case IMI most likely would dispose of the security based on then
existing market conditions). For additional information regarding the risks
associated with investing in high yield bonds, see the SAI (and, in particular,
Appendix A, which contains a more complete description of the ratings assigned
by Moody's and S&P).
FOREIGN SECURITIES: The foreign securities in which the Funds invest may
include non-U.S. dollar-denominated securities, Eurodollar securities, sponsored
or unsponsored ADRs, GDRs, ADSs and GDSs, and debt securities issued, assumed or
guaranteed by foreign governments (or political subdivisions or
instrumentalities thereof). Investors should consider carefully the special
risks that arise in connection with investing in securities issued by companies
and governments of foreign nations, which are in addition to those risks that
are associated with the Funds' investments, generally.
In many foreign countries, there is less regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. For example, foreign companies are not generally subject to uniform
accounting and financial reporting standards, and foreign securities
transactions may be subject to higher brokerage costs. There also tends to be
less publicly available information about issuers in foreign countries, and
foreign securities markets of many of the countries in which the Funds may
invest may be smaller, less liquid and subject to greater price volatility than
those in the United States. Generally, price fluctuations in the Funds' foreign
security
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holdings are likely to be high relative to those of securities issued in the
United States.
Other risks include the possibility of expropriation, nationalization or
confiscatory taxation, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), difficulties in
pricing, default in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social instability, or
other developments that could adversely affect the Funds' foreign investments.
In addition, investing in foreign securities usually involves the use of foreign
currencies. For a description of the risks associated with such currencies, see
the SAI.
The risks of investing in foreign securities (described above) are likely to
be intensified in the case of investments in issuers domiciled or doing
substantial business in countries with emerging or developing economies
("emerging markets"). For example, countries with emerging markets may have
relatively unstable governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of assets). Security
prices in emerging markets can also be significantly more volatile than in the
more developed nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Delayed settlements could cause a Fund to miss attractive investment
opportunities or impair its ability to dispose of portfolio securities,
resulting in a loss if the value of the securities subsequently declines. In
addition, many emerging markets have experienced and continue to experience
especially high rates of inflation. In certain countries, inflation has at times
accelerated rapidly to hyperinflationary levels, creating a negative interest
rate environment and sharply eroding the value of outstanding financial assets
in those countries.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. In order for these
emerging economies to continue to expand and develop industry, infrastructure
and currency reserves, continued influx of capital is essential. Historically,
there is a strong direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI believes that
investment opportunities (particularly in the energy, environmental services,
natural resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which the Funds and their shareholders will benefit. IMI believes
that similar investment opportunities will be created for companies involved in
providing consumer goods and services (e.g., food, beverages, autos, housing,
tourism and leisure and merchandising).
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: A Fund usually effects its currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. However, some price spread on currency exchange
(e.g., to cover service charges) is usually incurred when a Fund converts assets
from one currency to another. A Fund may also be affected unfavorably by
fluctuations in the relative rates of exchange between the currencies of
different nations or by political or economic developments in the U.S. or
abroad. For example, significant uncertainty surrounds the proposed introduction
of the euro (a common currency for the European Union) in January 1999 and its
effect on the value of securities denominated in local European currencies.
These and other currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the Funds.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date
at a predetermined price. Although these contracts are intended to minimize the
risk of loss due to a decline in the value of the hedged currencies, they also
tend to limit any potential gain that might result should the value of the
currencies increase. In addition, there may be an imperfect correlation between
a Fund's portfolio holdings of securities denominated in a particular currency
and forward contracts entered into by the Fund, which may prevent the Fund from
achieving the intended hedge or expose the Fund to the risk of currency exchange
loss.
OPTIONS AND FUTURES TRANSACTIONS: The Funds may use various techniques to
increase or decrease their exposure to changing security prices, currency
exchange rates, commodity prices, or other factors that affect the value of the
Funds' securities. These techniques may involve derivative transactions such as
purchasing put and call options, selling put and call options, and engaging in
transactions in foreign currency futures, stock index futures and related
options.
A Fund may invest in options on securities in accordance with its stated
investment objective and policies (see above). A put option is a short-term
contract that gives the purchaser of the option the right, in return for a
premium, to sell the underlying security or currency to the seller of the option
at a specified price during the term of the option. A call option is a
short-term contract that gives the purchaser the right, in return for a premium,
to buy the underlying security or currency from the seller of the option at a
specified price during the term of the option. An option on a stock index gives
the purchaser the right to receive from the seller cash equal to the difference
between the closing price of the index and the exercise price of the option.
A Fund may also enter into futures transactions in accordance with its
stated investment objective and policies. An interest rate futures contract is
agreement between two parties to buy or sell a specified debt security at a set
price on a future date. A foreign currency futures contract is an agreement to
buy or sell a specified amount of a foreign currency for a set price on a future
date. A stock index futures contract is an agreement to take or make delivery of
an amount of cash based on the difference between the value of the index at the
beginning and at the end of the contract period.
Investors should be aware that the risks associated with the use of options
and futures are considerable. Options and futures transactions generally involve
a small investment of cash relative to the magnitude of the risk assumed, and
therefore could result in a significant loss to a Fund if IMI judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments. A Fund may also experience a significant loss if it is
unable to close a particular position due to the lack of a liquid secondary
market. For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES: Investors in Ivy Global
Natural Resources Fund should be aware that commodities trading is generally
considered a speculative activity. For example, prices of precious metals are
affected by factors such as cyclical economic conditions, political events and
monetary policies of various countries. Accordingly, markets for precious metals
may at times be volatile and there may be sharp price fluctuations even during
periods when prices overall are rising. Investments in physical commodities may
also present practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and increased
expenses.
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REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
corporation, trust or association that invests in real estate mortgages or
equities for the benefit of its investors. REITs are dependent upon management
skill, may not be diversified and are subject to the risks of financing
projects. Equity REITs are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption under the 1940 Act. By investing
in REITs indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and agreed-upon
yield. Each Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. A Fund could experience a delay in obtaining direct ownership
of the underlying collateral, and might incur a loss if the value of the
security should decline.
ILLIQUID SECURITIES: An "illiquid security" is an asset that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security on its books.
Illiquid securities may include securities that are subject to restrictions on
resale ("restricted securities") because they have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"). Illiquid securities often
offer the potential for higher returns than more readily marketable securities,
but carry the risk that the Fund may not be able to dispose of them at an
advantageous time or price. The Fund may have to bear the expense of registering
restricted securities for resale, and the risk of substantial delays if
effecting such registrations. In addition, issuers of restricted securities may
not be subject to the disclosure and other investor protection requirements that
would apply if their securities were publicly traded.
SHARES OF OTHER INVESTMENT COMPANIES: As a shareholder of an investment
company, a Fund will bear its ratable share of the investment company's expenses
(including management fees, in the case of a management investment company).
SMALL COMPANIES: Investing in smaller company stocks involves certain
special considerations and risks that are not usually associated with investing
in larger, more established companies. For example, the securities of smaller
companies may be subject to more abrupt or erratic market movements, because
they tend to be thinly traded and are subject to a greater degree to changes in
the issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs in smaller
company stocks also may be higher than those of larger companies.
WARRANTS: The holder of a warrant has the right to purchase a given number
of shares of a particular issuer at a specified price until expiration of the
warrant. Such investments can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and are considered
speculative investments. For example, if a warrant were not exercised by the
date of its expiration, a Fund would lose its entire investment.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: Purchasing securities on a
"when-issued" or firm commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
ZERO COUPON BONDS: Zero coupon bonds are debt obligations issued without
any requirement for the periodic payment of interest, and are issued at a
significant discount from face value. Since the interest on such bonds is, in
effect, compounded, they are subject to greater market value fluctuations in
response to changing interest rates than debt securities that distribute income
regularly. In addition, for Federal income tax purposes a Fund generally
recognizes and is required to distribute income generated by zero coupon bonds
currently in the amount of the unpaid accrued interest, even though the actual
income will not yet have been received by the Fund.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund, other than Ivy South America Fund, is organized as a separate,
diversified portfolio of the Trust, an open-end management investment company
organized as a Massachusetts business trust on December 21, 1983. Ivy South
America Fund is organized as a non-diversified portfolio (see "Special
Considerations Related to Ivy South America Fund"). The business and affairs of
each Fund are managed under the direction of the Trustees. Information about the
Trustees, as well as the Trust's executive officers, may be found in the SAI.
The Trust has an unlimited number of authorized shares of beneficial interest,
and currently has 18 separate portfolios. Each Fund has four classes of shares,
designated as Class A, Class B, Class C and an Advisor Class (only the latter of
which is offered by this Prospectus). Ivy Global Science & Technology Fund, Ivy
International Fund II and Ivy International Small Companies Fund each has a
fifth class of shares designated as Class I. Shares of each Fund entitle their
holders to one vote per share (with proportionate voting for fractional shares).
The shares of each class represent an interest in the same portfolio of Fund
investments. Each class of shares, except for the Advisor Class and Class I, has
a separate Rule 12b-1 distribution plan and bears different distribution fees.
Class I shares are subject to lower administrative service and transfer agency
fees than the Funds' Class A, Class B, Class C and Advisor Class shares. Each
class of shares also has its own sales charge and expense structure that may
affect its performance relative to a Fund's other classes of shares. Shares of
each class have equal rights as to voting, redemption, dividends and liquidation
but have exclusive voting rights with respect to their Rule 12b-1 distribution
plans.
The Trust employs IMI to provide business management services to the Funds,
and investment advisory services to all of the Funds other than Ivy Canada Fund
and Ivy Global Natural Resources Fund (which are advised by MFC). IMI has been
an investment advisor since 1992. MIMI provides administrative and accounting
services. Ivy Mackenzie Distributors, Inc. ("IMDI") distributes the Funds'
shares, and Ivy Mackenzie Services Corp. ("IMSC") provides transfer agency and
shareholder-related services for the Funds. IMI, IMDI and IMSC are wholly-owned
subsidiaries of MIMI. As of March 31, 1998, IMI and MIMI had approximately $3.9
billion and $1.3 billion, respectively, in assets under management. MIMI is a
subsidiary of MFC, which has been an investment counsel and mutual fund manager
in Toronto, Ontario, Canada for more than 31 years.
INVESTMENT MANAGER
ALL FUNDS: For IMI's business management services and the investment
advisory services provided by IMI or MFC (as the case may be), each Fund pays a
fee based on its average net assets at the percentage rates set forth below
(subject to any applicable fee reimbursements or waivers noted in footnotes to
the "Annual Fund Operating Expenses" table on page 2). IMI voluntarily
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limits each Funds', except Ivy International Fund and Ivy Canada Fund, total
operating expenses (excluding Rule 12b-1 fees, interest, taxes, brokerage
commissions, litigation, indemnification, and extraordinary expenses) to 1.95%
(1.50%, in the case of Ivy International Fund II) of their respective average
net assets, which may lower their expenses and increase their total return (see
the "Annual Fund Operating Expenses"). Ivy Global Fund and Ivy Global Science &
Technology Fund total operating expenses for the year ended December 31, 1997
were below this limit. This voluntary expense limitation may be terminated or
revised at any time.
IMI pays all expenses that it incurs in rendering management services to the
Funds. Each Fund bears its own operational costs. General expenses of the Trust
that are not readily identifiable as belonging to a particular Fund (or a
particular class thereof) are allocated among and charged to each Fund based on
its relative net asset size. Expenses that are attributable to a particular Fund
(or class thereof) will be borne by that Fund (or class) directly. The
investment management fees paid by the Funds are higher than those charged by
many funds that invest primarily in U.S. securities, but not necessarily higher
than the fees charged to funds with investment objectives similar to those of
the Funds.
IVY CANADA FUND AND IVY GLOBAL NATURAL RESOURCES FUND: For IMI's business
management services, each Fund pays IMI a fee, at an annual rate of 0.50%. Each
Fund pays MFC a fee for advisory services, at an annual rate of 0.35% and 0.50%
for Ivy Canada Fund and Ivy Global Natural Resources Fund, respectively.
IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY DEVELOPING NATIONS FUND,
IVY GLOBAL SCIENCE & TECHNOLOGY FUND, IVY INTERNATIONAL FUND II, IVY
INTERNATIONAL SMALL COMPANIES FUND, IVY PAN-EUROPE FUND, AND IVY SOUTH AMERICA
FUND: For IMI's business management and investment advisory services, each Fund
pays IMI a fee, at an annual rate of 1.00%.
IVY GLOBAL FUND: For IMI's business management and investment advisory
services, the Fund pays IMI a fee, at an annual rate of 1.00% of the first $500
million in net assets and 0.75% on net assets over $500 million. For the year
ended December 31, 1997, the effective management fee paid to IMI was 1.00% of
the Fund's average net assets.
PORTFOLIO MANAGEMENT: The following individuals have responsibilities for
management of the Funds:
- James W. Broadfoot, President and Chief Investment Officer of IMI and Vice
President of the Trust, has been the portfolio manager for Ivy Global
Science & Technology Fund since 1996. Prior to joining the organization in
1990, Mr. Broadfoot was a principal in an investment counsel firm
specializing in emerging growth companies. Mr. Broadfoot has 25 years of
professional investment experience, and is a Chartered Financial Analyst.
He has an MBA from The Wharton School of the University of Pennsylvania.
- Michael G. Landry is the Chairman and a Director of IMI and the President
and a Director of MIMI and the Chairman and a Trustee of the Trust. Mr.
Landry has headed these organizations since 1987. Previously he was a
Senior Vice President and portfolio manager with Templeton International.
He has over 21 years of professional investment experience. He has a
degree in economics from Carleton University. Mr. Landry has been the
portfolio manager for Ivy Global Fund since 1991 and Ivy Developing
Nations Fund since 1994 and is a member of the Ivy international portfolio
management team.
- Frederick Sturm, a Senior Vice President of MFC, has been the portfolio
manager of Ivy Canada Fund since 1992 and Ivy Global Natural Resources
Fund since 1997. Mr. Sturm joined MFC in 1983 and has 12 years of
professional investment experience. In that time, Mr. Sturm has
established a performance record in the natural resource sector. Mr.
Sturm, a Chartered Financial Analyst, is a graduate of the University of
Toronto where he earned a degree in commerce and finance.
- Barbara Trebbi, a Senior Vice President of IMI, has been the portfolio
manager of Ivy International Fund II and Ivy International Small Companies
Fund since 1997. She is Managing Director of International Equities and a
member of the Ivy international portfolio management team. Ms. Trebbi
joined the organization in 1988 and has 10 years of professional
investment experience. She is a Chartered Financial Analyst and holds a
graduate diploma from the London School of Economics.
- The Ivy international portfolio management team has managed Ivy Asia
Pacific Fund since 1997, Ivy China Region Fund since 1993, Ivy Pan-Europe
Fund since 1997 and Ivy South America Fund since 1995. The Ivy
international portfolio management team consists of Barbara Trebbi,
Michael Landry and the Ivy international research team headed by Eric
Michelis. Mr. Michelis has a graduate degree in Economics and Finance from
Institut Des Etudes Politiques de Paris and a graduate degree from Ecole
Francaise D'Electronique et D'Informatique. Other team members include
Oleg Makhorine, located in Prague, who is a graduate of the Economics
University in Prague; Justin Lu, who is a graduate of Shanghai
International University; Moira McLachlan, who earned her degree in
international business from the University of South Carolina; and Jonathan
Tang, located in Shanghai, who is a graduate of Shanghai International
University.
IMI'S INVESTMENT PROCESS: Each of IMI's international equity portfolio
managers is supported by a team of research analysts, who are responsible for
providing objective information on regional and country-specific economic and
political developments and monitoring individual companies. Members of the
research analyst team that support IMI's international equity portfolio managers
are located in the U.S. at IMI's south Florida office, as well as in Asia and
Europe. IMI's analysts use a variety of research sources, such as brokerage
reports, economic and financial news services, equity databases and company
reports. Established relationships with more than thirty research firms provide
IMI's analysts and portfolio managers access to information on the various
factors that may influence a particular investment decision. These firms range
from large investment banks with global coverage to local research houses. In
many cases, IMI's investment professionals also conduct primary research by
meeting with company management, touring facilities, and speaking with local
research analysts, economists and strategists. Such primary research is
considered particularly important in emerging market countries.
Research efforts by IMI focus on determining opportunities that fall within
IMI's long-term, value-oriented approach to investing. The investment decision
making process starts with a "top-down" view of a particular country and the
long-term outlook for given industries within that country. Company selection
generally is based on a "bottom-up" analysis of certain value measures (e.g.,
earnings, cash flow and growth potential) that are monitored in a proprietary
database in which risk-adjusted company valuations across countries and
industries are compared. Ultimate investment decisions take into account the
fund's investment objective, diversification requirements and risk tolerance
level. While current earnings are considered important, investment decisions
most often are based on earnings estimates over a five-year period. Stock
selection typically is concentrated in the cheapest 20% of the universe and sell
recommendations normally are generated when valuations reach the top 20% of the
universe.
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FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Funds, such as
maintaining the registration of Fund shares under state "Blue Sky" laws, and
assisting with the preparation of Federal and state income tax returns,
financial statements and periodic reports to shareholders. MIMI also assists the
Trust's legal counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this arrangement, the
average net assets attributable to each Fund's Advisor Class shares are subject
to a fee, accrued daily and paid monthly, at an annual rate of .10%.
MIMI also provides certain accounting and pricing services for the Funds
(see "Fund Accounting Services" in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Funds, and also
provides certain shareholder-related services. Certain broker-dealers that
maintain shareholder accounts with the Funds through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment Advisory and
Other Services" in the SAI).
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from a Fund are reinvested in
additional Advisor Class shares unless you elect to receive them in cash.
Dividends ordinarily will vary from one class to another.
Each Fund will distribute net investment income and net realized capital
gains, if any, at least once a year. An additional distribution may be made of
net investment income and net realized capital gains to comply with the calendar
year distribution requirement under the excise tax provisions of Section 4982 of
the Code.
TAXATION: The following discussion is intended for general information
only. You should consult with your tax adviser as to the tax consequences of an
investment in a particular Fund, including the status of distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as a regulated investment company
under the Code. To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any Federal income or excise tax.
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of a Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that a Fund designates as capital gain dividends are
taxable to individual shareholders at a maximum 20% or 28% capital gains rate,
regardless of how long the shareholder has held the Fund's shares. Dividends are
taxable to shareholders in the same manner whether received in cash or
reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in debt securities that are issued at a discount will result in
income to a Fund equal to a portion of the excess of the face value of the
securities over their issue price, even though the Fund receives no cash
interest payments from the securities.
Income and gains received by a Fund from sources within foreign countries
may be subject to foreign withholding and other taxes. Unless a Fund is eligible
to and elects to "pass through" to its shareholders the amount of foreign income
and similar taxes paid by the Fund, these taxes will reduce the Fund's
investment company taxable income, and distributions of investment company
taxable income received from the Fund will be treated as U.S. source income.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of the Fund, generally will be a capital gain or loss which may be
eligible for reduced Federal tax rates, generally depending upon the
shareholder's holding period for the shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service
("IRS") that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies, authorities and instrumentalities
may be exempt from state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield") is computed
separately for each class of Fund shares in accordance with formulas prescribed
by the SEC. Performance information for each class may be compared in reports
and promotional literature to indices such as the Standard and Poor's 500 Stock
Index, Dow Jones Industrial Average, and Morgan Stanley Capital International
World Index. Advertisements, sales literature and communications to shareholders
may also contain statements of a Fund's current yield, various expressions of
total return and current distribution rate. Performance figures will vary in
part because of the different expense structures of the Funds' different
classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in a Fund for a
specified period, and assumes the reinvestment of all distributions and
imposition of the maximum applicable sales charge. "Average annual total return"
represents the average annual compound rate of return of an investment in a
particular class of Fund shares assuming the investment is held for one year,
five years and ten years as of the end of the most recent calendar quarter.
Where a Fund provides total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value, "total return"
is based on the total of all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the original
investment expressed as a percentage of the purchase price.
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"Current yield" reflects the income per share earned by a Fund's portfolio
investments, and is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and then annualizing the result. Dividends or
distributions that were paid to a Fund's shareholders are reflected in the
"current distribution rate," which is computed by dividing the total amount of
dividends per share paid by a Fund during the preceding 12 months by the Fund's
current maximum offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield" computation
because it may include distributions to shareholders from sources other than
dividends and interest, short term capital gain and net equalization credits and
will be calculated over a different period of time.
HOW TO BUY SHARES
Advisor Class shares are offered through this Prospectus only to the
following investors:
(i) trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
(ii) any account with assets of at least $10,000 if (a) a financial planner,
trust company, bank trust department or registered investment adviser has
investment discretion, and where the investor pays such person as
compensation for its advice and other services an annual fee of at least
.50% on the assets in the account, or (b) such account is established
under a "wrap fee" program and the account holder pays the sponsor of the
program an annual fee of at least .50% on the assets in the account;
(iii) officers and Trustees of the Trust (and their relatives);
(iv) officers, directors, employees, retired employees, legal counsel and
accountants of IMI, MIMI, and MFC (and their relatives); and
(v) directors, officers, partners, registered representatives, employees and
retired employees (and their relatives) of dealers having a sales
agreement with IMDI (or trustees or custodians of any qualified retirement
plan or IRA established for the benefit of any such person).
OPENING AN ACCOUNT: Complete and sign the Account Application on the last
page of this Prospectus. Make your check payable to the Fund in which you are
investing. No third party checks will be accepted. Deliver these items to your
registered representative or selling broker, or send them to one of the
addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Funds reserve the right to reject any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment in Advisor
Class shares is $10,000. The minimum additional investment is $250. Initial or
additional amounts for retirement accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at any time through
any of the following options:
By Mail: Complete the investment slip attached to your statement, or write
instructions including the account registration, Fund number and account number
of the shares you wish to purchase. Send your check (payable to the Fund in
which you are investing), along with your investment slip or written
instructions, to one of the addresses above.
Through Your Broker: Deliver to your registered representative or selling
broker the investment slip attached to your statement, or written instructions,
along with your payment.
By Wire: Purchases may also be made by wiring money from your bank account
to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as
follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
By Automatic Investment Method: Complete Sections 6A and 7B on the Account
Application (see "Automatic Investment Method" on page 18 for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Advisor Class shares of a Fund is the net asset
value ("NAV") per share.
Share purchases will be made at the next determined price after your
purchase order is received. The price is effective for orders received by IMSC
or by your registered securities dealer prior to the time of the determination
of the NAV. Any orders received after the time of the determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer before the NAV is determined that are
transmitted through the facilities of the National Securities Clearing
Corporation on the same day are confirmed at that day's price. Any loss
resulting from the dealer's failure to submit an order by the deadline will be
borne by that dealer.
You will receive an account statement after any purchase, exchange or full
liquidation. Statements related to reinvestment of dividends, capital gains,
automatic investment plans (see the SAI for further explanation) and/or
systematic withdrawal plans will be sent quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is determined for each
Class of shares as of the close of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open by dividing the value of a Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding, adjusted to the nearest cent. These procedures are described more
completely in the SAI.
The Trustees have established procedures to value a Fund's securities in
order to determine the NAV. Securities and other assets for which market
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prices are not readily available are valued at fair value, as determined by IMI
and approved by the Trustees. Money market instruments of a Fund are valued at
amortized cost.
Trading in securities on European and Far Eastern securities exchanges is
normally completed before the close of regular trading on the Exchange. Trading
on these foreign exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on which there is no
regular trading on the Exchange. If events materially affecting the value of the
Fund's portfolio securities occur between the time when these foreign exchanges
close and the time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and approved by the
Trustees.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at its own expense,
pay concessions to dealers that satisfy certain criteria established from time
to time by IMDI. These conditions relate to increasing sales of shares of the
Funds over specified periods and to certain other factors. These payments may,
depending on the dealer's satisfaction of the required conditions, be periodic
and may be up to (i) 0.25% of the value of Fund shares sold by the dealer during
a particular period, and (ii) 0.10% of the value of Fund shares held by the
dealer's customers for more than one year, calculated on an annual basis.
An investor may be charged a transaction fee for Advisor Class shares
purchased or redeemed through a broker or agent other than IMDI.
HOW TO REDEEM SHARES
You may redeem your Advisor Class shares through your registered securities
representative, by mail or by telephone. All redemptions are made at the NAV
next determined after a redemption request has been received in good order.
Requests for redemptions must be received by 4:00 p.m. Eastern time to be
processed at the NAV for that day. Any redemption request in good order that is
received after 4:00 p.m. Eastern time will be processed at the price determined
on the following business day. If you own shares of more than one class of a
Fund, the Fund will redeem first the shares having the highest 12b-1 fees; any
shares subject to a CDSC will be redeemed last unless you specifically elect
otherwise.
When shares of a Fund are redeemed, the Fund will normally send redemption
proceeds to you on the next business day, but may take up to seven business days
(or longer in the case of shares recently purchased by check). Under unusual
circumstances, a Fund may suspend redemptions or postpone payment to the extent
permitted by Federal securities laws. The proceeds of the redemption may be more
or less than the purchase price of your shares, depending upon, among other
factors, the market value of the Fund's securities at the time of the
redemption. If the redemption is for over $50,000, or the proceeds are to be
sent to an address other than the address of record, or an address change has
occurred in the last 30 days, it must be requested in writing with a signature
guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a redemption, please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is responsible for
promptly transmitting redemption orders. Redemptions requested by dealers will
be made at the NAV determined at the close of regular trading (4:00 p.m. Eastern
time) on the day that a redemption request is received in good order by IMSC.
BY MAIL: Requests for redemption in writing are considered to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the account registration, fund number,
the account number and the dollar amount or number of shares to be
redeemed.
- Signatures of all registered owners whose names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the case of estates,
trusts, guardianships, corporations, unincorporated associations,
retirement plan trustees or others acting in representative capacities).
The dollar amount or number of shares indicated for redemption must not
exceed the available shares or NAV of your account at the next-determined
prices. If your request exceeds these limits, then the trade will be rejected in
its entirety.
Mail your request to IMSC at one of the addresses on page 15 of this
Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per
day over the telephone by contacting IMSC at 1- 800-777-6472. In times of
unusual economic or market changes, the telephone redemption privilege may be
difficult to implement. If you are unable to execute your transaction by
telephone, you may want to consider placing the order in writing and sending it
by mail or overnight courier.
Checks will be made payable to the current account registration and sent to
the address of record. If there has been a change of address in the last 30
days, please use the instructions for redemption requests by mail described
above. A signature guarantee would be required.
Requests for telephone redemptions will be accepted from the registered
owner of the account, the designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed by telephone.
If Section 6E of the Account Application is not completed, telephone
redemption privileges will be provided automatically. Although telephone
redemptions may be a convenient feature, you should realize that you may be
giving up a measure of security that you may otherwise have if you terminated
the privilege and redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures that require personal identification
prior to acting on redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
Receiving Your Proceeds by Federal Funds Wire: For shareholders who
established this feature at the time they opened their account, telephone
instructions will be accepted for redemption of amounts up to $50,000 ($1,000
minimum) and proceeds will be wired on the next business day to a predesignated
bank account.
In order to add this feature to an existing account or to change existing
bank account information, please submit a letter of instructions including your
bank information to IMSC at the address provided above. The letter must be
signed by all registered owners, and their signatures must be guaranteed.
Your account will be charged a fee of $10 each time redemption proceeds are
wired to your bank. Your bank may also charge you a fee for receiving a Federal
Funds wire.
16
<PAGE> 93
Neither IMSC nor any of the Funds can be responsible for the efficiency of
the Federal Funds wire system or the shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and subject to state law
requirements, a Fund may redeem the accounts of shareholders whose investment
has been less than $10,000 for more than 12 months. A Fund will not redeem an
account unless the shareholder has been given at least 60 days' advance notice
of the Fund's intention to do so. No redemption will be made if a shareholder's
account falls below the minimum due to a reduction in the value of the Fund's
portfolio securities. This provision does not apply to IRAs, other retirement
accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions, we require a
signature guarantee to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank account (if this
option was not selected on your original application, or if you are
changing the bank wire information).
A signature guarantee may be obtained only from an eligible guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended. Eligible guarantor institutions include banks, brokers, dealers,
municipal securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. The
signature guarantee must not be qualified in any way. Notarizations from notary
publics are not the same as signature guarantees, and are not accepted.
Circumstances other than those described above may require a signature
guarantee. Please contact IMSC at 1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are
automatically reinvested at NAV in additional Advisor Class shares of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital gains are
automatically invested at NAV in the Advisor Class shares of another Ivy Fund.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in
cash. Capital gains will be reinvested at NAV in additional Advisor Class shares
of a Fund or the Advisor Class shares of another Ivy Fund.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will
be paid in cash.
If you wish to have your cash distributions deposited directly to your bank
account via electronic funds transfer, ("EFT") or if you wish to change your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address other than the
address of record, you must provide IMSC with a letter of instruction signed by
all registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal backup withholding
tax on dividends, capital gains distributions and redemption proceeds, you must
furnish a Fund with your certified tax identification number ("TIN") and certify
that you are not subject to backup withholding due to prior underreporting of
interest and dividends to the IRS. If you fail to provide a certified TIN, or
such other tax-related certifications as a Fund may require, within 30 days of
opening your new account, each Fund reserves the right to involuntarily redeem
your account and send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by correctly
furnishing your TIN, and making certain certifications, in Section 2 of the
Account Application at the time you open your new account, unless the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt from backup
withholding. Please complete IRS Form W-9 with the new account application to
claim this exemption. If the registration is for an UGMA/UTMA account, please
provide the social security number of the minor. Alien individuals must furnish
their individual TIN on a completed IRS Form W-9. Other non-U.S. investors who
are not required to have a TIN must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
To facilitate transfers, exchanges and redemptions, most shareholders elect
not to receive certificates. Should you wish to have a certificate issued,
please contact IMSC at 1-800-777-6472 and request that one be sent to you.
(Retirement plan accounts are not eligible for this service.) Please note that
if you were to lose your certificate, you would incur an expense to replace it.
Certificates requested by telephone for shares valued up to $50,000 will be
issued to the current registration and mailed to the address of record. Should
you wish to have your certificates mailed to a different address, or registered
differently from the current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Advisor Class shareholders may exchange their outstanding Advisor Class
shares for Advisor Class shares of another Ivy fund (other than Ivy
International Fund), or Ivy Money Market Fund, on the basis of the relative NAV
per Advisor Class share. Exchanges into an Ivy fund in which shares are not
already held are subject to certain minimum investment restrictions. See
"Exchange of Shares" in the SAI or contact IMSC at 1-800-777-6472 for further
details. The Funds reserve the right to reject any exchange order.
Exchanges are considered to be taxable events, and may result in a capital
gain or a capital loss for tax purposes. Before executing an exchange, you
should obtain and read the prospectus and consider the investment objective of
the fund to be purchased. Share certificates must be unissued (i.e., held by a
Fund) to execute a telephone exchange. Exchanges are available only in states
where they can be legally made. The Funds reserve the right to limit the
frequency of exchanges. Exchanges are accepted only if the registrations of the
two accounts are identical. Amounts to be exchanged must meet minimum investment
requirements for the Ivy fund into which the exchange is made. It is the policy
of the Funds to discourage the use of the exchange privilege for the purpose of
timing short-term market fluctuations. To protect the interests of other
shareholders of a Fund, a Fund may cancel the exchange privileges of any
17
<PAGE> 94
persons that, in the opinion of the Fund, are using market timing strategies or
are making more than five exchanges per owner or controlling person per calendar
year.
EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not
completed, telephone exchange privileges will be provided automatically for
accounts qualifying for this option. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up a measure of
security that you may otherwise have if you terminated the privilege and
exchanged your shares in writing. If you do not wish to make telephone exchanges
or let your registered representative do so on your behalf, you must notify IMSC
in writing.
To execute an exchange, please contact IMSC at 1-800-777-6472. Have the
account number of your current fund and the exact name in which it is registered
available to give to the telephone representative.
Each Fund employs reasonable procedures that require personal identification
prior to acting on exchange instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, a Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and provide the
following information:
- The name and class of the fund whose shares you currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your exchange to be invested.
- The number of shares or the dollar amount you wish to exchange.
The request must be signed by all registered owners.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by completing the
Account Application, which is attached to this Prospectus. You can also obtain
this application by contacting your registered representative or IMSC at
1-800-777-6472. To be eligible, you must maintain an account balance of at least
$10,000. Payments (minimum distribution amount -- $50) from your account can be
made monthly, quarterly, semi-annually, annually or on a selected monthly basis,
to yourself or any other designated payee. You may elect to have your systematic
withdrawal paid directly to your bank account via EFT, at no charge. Share
certificates must be unissued (i.e., held by a Fund) while the plan is in
effect. A Systematic Withdrawal Plan may not be established if you are currently
participating in the Automatic Investment Method. For more information, please
contact IMSC at 1-800-777-6472.
Amounts paid to you through the Systematic Withdrawal Plan are derived from
the redemption of shares in your account. Redemptions are taxable events.
If payments you receive through the Systematic Withdrawal Plan exceed the
dividends and capital appreciation of your account, you will be reducing the
value of your account. Additional investments made by shareholders participating
in the Systematic Withdrawal Plan must equal at least $250 while the plan is in
effect.
Should you wish at any time to add a Systematic Withdrawal Plan to an
existing account or change payee instructions, you will need to submit a written
request, signed by all registered owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares by completing Sections 6A and 7B of the
Account Application. Attach a "voided" check to your account application. At
pre-specified intervals, your bank account will be debited and the proceeds will
be credited to your Ivy Fund account. The minimum investment under this plan is
$250 per month ($25 per month for retirement plans). There is no charge to you
for this program.
You may terminate or suspend your Automatic Investment Method by telephone
at any time by contacting IMSC at 1-800-777-6472.
If you have investments being withdrawn from a bank account and we are
notified that the account has been closed, your Automatic Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy fund accounts having the same taxpayer
I.D. number will receive a single quarterly account statement, unless otherwise
specified. This feature consolidates the activity for each account onto one
statement. Requests for quarterly consolidated statements for all other accounts
must be submitted in writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy Funds offer several tax-sheltered retirement plans that may fit your
needs:
- Traditional and Roth IRAs
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans are $25.
Investors Bank & Trust, which serves as custodian or trustee under the
retirement plan prototypes available from each Fund, charges certain nominal
fees for annual maintenance. A portion of these fees is remitted to IMSC as
compensation for its services to the retirement plan accounts maintained with
each Fund.
Distributions from retirement plans are subject to certain requirements
under the Code. Certain documentation, including IRS Form W4-P, must be provided
to IMSC prior to taking any distribution. Please contact IMSC for details. The
Ivy Funds and IMSC assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws, and will not be responsible for
any penalties assessed. For additional information, please contact your broker,
tax adviser or IMSC.
Please call IMSC at 1-800-777-6472 for complete information kits describing
the plans, their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be directed to IMSC at 1-800-777-6472.
18
<PAGE> 95
ADVISOR CLASS SHARES
ACCOUNT APPLICATION
<TABLE>
<S> <C> <C>
IVY ASIA PACIFIC FUND IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY CANADA FUND IVY INTERNATIONAL FUND II
IVY CHINA REGION FUND IVY INTERNATIONAL SMALL COMPANIES FUND
IVY DEVELOPING NATIONS FUND IVY PAN-EUROPE FUND
IVY GLOBAL FUND IVY SOUTH AMERICA FUND ------------------------
IVY GLOBAL NATURAL RESOURCES FUND ACCOUNT NUMBER
</TABLE>
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for which Ivy is
custodian.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FUND 101/ 1 / 2 1 / 2
USE ------------------- ---------- ---------- ---------- ---------- ---------- ----------
ONLY Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
FUND 0 / 1 0 / X
USE ---------- ----------
ONLY Exc Cd Red Cd
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
1 REGISTRATION
[ ] Individual ------------------------------------------------------------
[ ] Joint Tenant Owner, Custodian or Trustee
[ ] Estate ------------------------------------------------------------
[ ] UGMA/UTMA Co-owner or Minor
[ ] Corporation ------------------------------------------------------------
[ ] Partnership Minor's State of Residence
[ ] Sole Proprietor ------------------------------------------------------------
[ ] Trust Street
-------------------
Date of Trust
[ ] Other
-----------
------------------- --------------------------------------------------------------------------------------------
City State Zip Code
- - - -
------------------------------ ------------------------------
Phone Number -- Day Phone Number -- Evening
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
2 TAX ID #
- - or -
--------------------------- -------------------------
Social Security Number Tax Identification Number
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
2 Citizenship: [ ] U.S. [ ] Other________________________
UNDER PENALTIES OF PERJURY, I CERTIFY BY SIGNING IN SECTION 8 BELOW THAT: (1) THE NUMBER SHOWN IN
THIS SECTION IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (TIN), AND (2) I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE: (A) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (B)
THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (CROSS OUT ITEM (2) IF
YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.) PLEASE SEE THE "TAX IDENTIFICATION
NUMBER" SECTION OF THE PROSPECTUS FOR ADDITIONAL INFORMATION ON COMPLETING THIS SECTION.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
3 DEALER
INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature and
legal capacity of the Shareholder, and agrees to notify IMSC
of any purchases made under a Letter of Intent or Rights of
Accumulation.
------------------------------------------------------------
Dealer Name
------------------------------------------------------------
Branch Office Address
------------------------------------------------------------
City State Zip
Code
------------------------------------------------------------
Representative's Name and Number
------------------------------------------------------------
Representative's Phone Number
------------------------------------------------------------
Authorized Signature of Dealer
- ------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
4 INVESTMENTS
A. Enclosed is my check for $ _______________($10,000 minimum) made payable to the appropriate Fund.* Please invest it
as follows:
$ _______________ Ivy Asia Pacific Fund(648) $ _______________ Ivy Global Science & Technology Fund(647)
$ _______________ Ivy Canada Fund(645) $ _______________ Ivy International Fund II(652)
$ _______________ Ivy China Region Fund(640) $ _______________ Ivy International Small Companies Fund(650)
$ _______________ Ivy Developing Nations Fund(643) $ _______________ Ivy Pan_Europe Fund(651)
$ _______________ Ivy Global Fund(646) $ _______________ Ivy South America Fund(642)
$ _______________ Ivy Global Natural Resources Fund(649)
*If investing in more than one Fund, make your check payable to
"Ivy Funds".
B. FOR DEALER USE ONLY
Confirmed trade orders:
--------------- ---------------- -------------
Confirm Number Number of Shares Trade Date
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5 DISTRIBUTON OPTIONS
I would like to reinvest dividends and capital gains into additional
shares in this account at net asset value unless a different option is
checked below.
A. [ ] Reinvest all dividends and capital gains into additional shares of
a different Ivy fund.
-----------------------------------
Fund Name
[ ] New Account
-----------------------------------
Account Number
B. [ ] Pay all dividends in cash and reinvest capital gains into
additional shares of this Fund or in a different Ivy Fund.
-----------------------------------
Fund Name
[ ] New Account
-----------------------------------
Account Number
C. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the registration.
[ ] Sent to the special payee listed in Section 7A [ ] (By Mail)
7B [ ] (By E.F.T.)
- --------------------------------------------------------------------------------
<PAGE> 96
- --------------------------------------------------------------------------------
6 OPTIONAL SPECIAL FEATURES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
<S> <C>
I wish to invest: My Bank account will be debted on or about the:
[ ] Annually _________________ day of the month of __________
[ ] Semi-Annually _________________ day of the months of __________ and __________
[ ] Quarterly _________________ day of the [ ] first month of each calendar quarter
[ ] second
[ ] third
[ ] Monthly
[ ] once per month ________ day of the month*
[ ] twice ________ day of the month*
[ ] 3 times ________ day of the month*
[ ] 4 times ________ day of the month*
Please invest $ _____________ each period starting in the month of _________ in Advisor Class shares of _____________________ .
Dollar Amount Month Fund Name
[ ] I have attached a voided check to ensure my correct bank account will be debited.
<CAPTION>
B. [ ] SYSTEMATIC WITHDRAWAL PLANS**
<S> <C>
I wish to automatically withdraw funds from my I request the distribution be:
account in Advisor Class shares of __________________________ [ ] Sent to the address listed in the registration.
Fund Name [ ] Sent to the special payee listed in Section 7.
[ ] Monthly [ ] Invested into additional shares of the same
[ ] Once [ ] Twice [ ] 3 times [ ] 4 times per month class of a different Ivy fund: _______________________
[ ] Quarterly Fund Name
[ ] Semi-Annually
[ ] Annually
------------------------
Account Number
Amount $ ______________________________, starting on or about the ________ day of __________________________
Minimum $250 month
________ day of __________________________
month
________ day of __________________________
month*
NOTE: Account minimum: $10,000 in shares at current offering price
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the redemption of Fund shares up to $50,000. Proceeds may be wire
transferred to the bank account designated ($1,000 minimum). (COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES** [ ] YES [ ] NO
I authorize exchanges by telephone among the Ivy family of funds, upon instructions from any person as more fully described
in the Prospectus. To change this option once established, written instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone exchange privilege will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS** [ ] YES [ ] NO
The Fund or its agents are authorized to honor telephone instructions from any person as more fully described in the
Prospectus for the redemption of Fund shares. The amount of the redemption shall not exceed $50,000 and the proceeds are to
be payable to the shareholder of record and mailed to the address of record. To change this option once established,
written instructions must be received from the shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege will be provided automatically.
* There must be a period of at least seven calendar days between each investment/withdrawal period.
** This option may not be selected if shares are issued in certificate form.
</TABLE>
- --------------------------------------------------------------------------------
7 SPECIAL PAYEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION
<S> <C> <C> <C>
Please send all disbursements to this special payee
____________________________________________________________
Financial Institution
___________________________________________________
Name of Bank or Individual _____________________________ ____________________________
ABA # Account #
___________________________________________________
Account Number (if applicable) ____________________________________________________________
Street
___________________________________________________
Street ____________________________________________________________
City/State/Zip
___________________________________________________
City/State/Zip (Please attach a voided check)
</TABLE>
- --------------------------------------------------------------------------------
8 SIGNATURES
- --------------------------------------------------------------------------------
Investors should be aware that failure to check "No" under Section 6D or 6E
above means that the Telephone Exchange/Redemptions Privileges will be provided.
The Funds employ reasonable procedures that require personal identification
prior to acting on exchange/redemption instructions communicated by telephone to
confirm that such instructions are genuine. In the absence of such procedures, a
Fund may be liable for any losses due to unauthorized or fraudulent telephone
instructions. Please see "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus for more information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the Fund for my
own account or for the account of the organization named in Section 1. I have
received a current Prospectus and understand its terms are incorporated in this
application by reference. I am certifying my taxpayer information as stated in
Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
___________________________________________________________ ________________
Signature of Owner, Custodian, Trustee or Corporate Officer Date
___________________________________________________________ ________________
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
- --------------------------------------------------------------------------------
(Remember to Sign Section 8)
01NTLADV0498
<PAGE> 97
April 30, 1998
IVY
MONEY
MARKET
FUND
- ----------
Prospectus
- ----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
IVY FUNDS(R)
Ivy Fund (the "Trust") is a registered investment company currently
consisting of eighteen separate portfolios. One portfolio of the Trust, Ivy
Money Market Fund (the "Fund"), is described in this Prospectus.
This Prospectus sets forth concisely the information about the Fund
that a prospective investor should know before investing. Please read it
carefully and retain it for future reference. Additional information about the
Fund is contained in the Statement of Additional Information for the Fund dated
April 30, 1998 (the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. The SAI is available upon request and without charge from the Trust
at the Distributor's address and telephone number below. The SEC maintains a web
site (http://www.sec.gov) that contains the SAI and other material incorporated
by reference.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Expense Information........................2
The Fund's Financial Highlights............3
Investment Objective and Policies..........3
Risk Factors and Investment Techniques.....4
Organization and Management of the Fund....4
Investment Manager.........................5
Fund Administration and Accounting.........5
Transfer Agent.............................5
Dividends and Taxes........................5
Performance Data...........................6
How to Buy Shares..........................6
How Your Purchase Price is Determined......6
How the Fund Values its Shares.............7
How to Redeem Shares.......................7
Minimum Account Balance Requirements.......8
Signature Guarantees.......................8
Choosing a Distribution Option.............8
Tax Identification Number..................8
Certificates...............................9
Exchange Privilege.........................9
Systematic Withdrawal Plan.................9
Automatic Investment Method...............10
Consolidated Account Statements...........10
Retirement Plans..........................10
Shareholder Inquiries.....................10
Account Application.......................11
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT
John S. Anderegg, Jr. Michael G. Landry, Chairman Ivy Mackenzie INVESTMENT MANAGER
Paul H. Broyhill Keith J. Carlson, President Services Corp. Ivy Management, Inc.
Keith J. Carlson James W. Broadfoot, Vice President P.O. Box 3022 700 South Federal Highway
Stanley Channick C. William Ferris, Boca Raton, FL 33431-0922 Boca Raton, FL 33432
Frank W. DeFriece, Jr. Secretary/Treasurer 1-800-777-6472 1-800-456-5111
Roy J. Glauber LEGAL COUNSEL AUDITORS DISTRIBUTOR
Michael G. Landry Dechert Price & Rhoads Coopers & Lybrand L.L.P. Ivy Mackenzie
Joseph G. Rosenthal Boston, MA Ft. Lauderdale, FL Distributors, Inc.
Richard N. Silverman CUSTODIAN Via Mizner Financial Plaza
J. Brendan Swan Brown Brothers Harriman & Co. 700 South Federal Highway
Boston, MA Boca Raton, FL 33432
1-800-456-5111
</TABLE>
[IVY MACKENZIE LOGO]
<PAGE> 98
EXPENSE INFORMATION
The table and example below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
MAXIMUM SALES
LOAD IMPOSED ON
PURCHASES (AS A
PERCENTAGE OF
OFFERING PRICE)*
----------------
<S> <C>
Class A Shares.............................................. None
Class B Shares.............................................. None
Class C Shares.............................................. None
The Fund has no sales load on reinvested dividends, no
deferred sales load, no redemption fees and no exchange
fees.**
</TABLE>
* Exchanges from the Fund into any other Ivy fund into which exchanges are
permitted may be subject to a sales charge unless previously paid (see
"Exchange Privilege").
** The Fund does not assess a contingent deferred sales charge ("CDSC").
However, if the shares of another Ivy fund that are subject to a CDSC are
exchanged for shares of the Fund, the CDSC may carry over to the investment
in the Fund and may be assessed upon redemption (see "How to Redeem Shares"
and "Exchange Privilege").
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management Fees (After Expense Reimbursements)*........ 0.00% 0.00% 0.00%
12b-1 Service/Distribution Fees........................ N/A N/A N/A
Other Expenses......................................... 0.88% 0.70% 0.70%
---- ---- ----
Total Fund Operating Expenses (After Expense
Reimbursements)**..................................... 0.88% 0.70% 0.70%
==== ==== ====
</TABLE>
* Management Fees reflect expense reimbursements. Without expense
reimbursements, Management Fees would have been 0.40%.
** Ivy Management, Inc. ("IMI"), as investment adviser, currently limits the
Fund's Total Fund Operating Expenses (at the fund level, not at the class
level, and excluding taxes, interest, litigation and indemnification expenses
and other extraordinary expenses) to an annual rate of 0.85% of the Fund's
average net assets. Without the expense reimbursements, Total Fund Operating
Expenses for the year ended December 31, 1997 would have increased 0.69% for
each class of the Fund.
EXAMPLES
The following table lists the expenses an investor would pay on a $1,000
investment in the Fund, assuming (1) 5% annual return and (2) redemption at the
end of each time period. The Example further assumes reinvestment of all
dividends and distributions, and that the percentage amounts under "Total Fund
Operating Expenses (After Expense Reimbursements)" (above) remain the same each
year. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A...................... $9 $28 $49 $108
Class B...................... $7 $22 $39 $ 87
Class C...................... $7 $22 $39 $ 87
</TABLE>
The information in the table above does not reflect the charge of $10 per
transaction that would apply if a shareholder elects to have redemption proceeds
wired to his/her bank account. For a more detailed discussion of the Fund's fees
and expenses, see "Organization and Management of the Fund" in this Prospectus,
and "Investment Advisory and Other Services" in the SAI.
2
<PAGE> 99
THE FUND'S FINANCIAL HIGHLIGHTS
Unless otherwise noted, the following table is for fiscal periods ending
December 31 of each year. The accounting firm of Coopers & Lybrand L.L.P. has
audited the Fund since December 31, 1992. Their report is included in the Fund's
Annual Report, which is incorporated by reference into the SAI. The information
for fiscal periods prior to December 31, 1992 was audited by other independent
accountants. The Fund's Annual Report contains additional information about the
Fund's performance. For a copy of the Fund's Annual Report, call 1-800-777-6472.
Expense and income ratios have been annualized for periods of less than one
year. Total returns do not reflect sales charges, and are not annualized for
periods of less than one year.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
SELECTED PER SHARE DATA ------- ---- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income(a).......... .05 .04 .05 .04 .02 .03 .05 .07
Less distributions
From net investment income........ (.05) (.04) (.05) (.04) (.02) (.03) (.05) (.07)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= =======
Total return(%).................... 4.60 4.47 4.80 4.21 2.42 2.81 5.16 7.69
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $15,385 $21,359 $24,609 $26,827 $25,782 $18,839 $21,675 $26,140
Ratio of expenses to average net
assets
With expense reimbursement(%)..... .88 .86 .85 .85 .85 .85 .85 .67
Without expense
reimbursement(%)................ 1.57 1.86 1.39 1.24 1.56 1.45 1.21 1.22
Ratio of net investment income to
average net assets(%)(a).......... 4.60 4.47 4.91 3.29 2.22 2.75 5.06 7.43
<CAPTION>
CLASS A
------------------
1989 1988
SELECTED PER SHARE DATA ------- -------
<S> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00
------- -------
Income from investment operations
Net investment income(a).......... .09 .07
Less distributions
From net investment income........ (.09) (.07)
------- -------
Net asset value, end of period..... $ 1.00 $ 1.00
======= =======
Total return(%).................... 8.87 6.89
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $19,708 $11,789
Ratio of expenses to average net
assets
With expense reimbursement(%)..... .65 .68
Without expense
reimbursement(%)................ 1.37 1.73
Ratio of net investment income to
average net assets(%)(a).......... 8.42 6.86
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------- -----------------
1997 1996 1997 1996(B)
SELECTED PER SHARE DATA ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $1.00 $ 1.00
------- ------- ----- -------
Income from investment operations
Net investment income(a)................................. .05 .05 .05 .03
Less distributions
From net investment income............................... (.05) (.05) (.05) (.03)
------- ------- ----- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $1.00 $ 1.00
======= ======= ===== =======
Total return (%)............................................ 4.77 4.57 4.78 4.78
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $3,812 $3,474 $ 405 $ 74
Ratio of expenses to average net assets
With expense reimbursement(%)............................ .70 .77 .70 .56
Without expense reimbursement(%)......................... 1.39 1.77 1.39 1.56
Ratio of net investment income to average net
assets(%)(a)............................................... 4.77 4.57 4.78 4.78
</TABLE>
- ---------------
(a) Net investment income is net of expenses reimbursed by IMI.
(b) From April 30, 1996 (commencement of operations) to December 31, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to obtain as high a level of current income as is consistent
with the preservation of capital and liquidity by investing in high-quality,
short-term securities. The Fund's investment objective is fundamental and may
not be changed without the approval of a majority of the Fund's outstanding
voting shares, although the Trustees may make non-material changes in the Fund's
objectives without shareholder approval. Except for the Fund's investment
objective and those investment restrictions specifically identified as
fundamental, all investment policies and practices described in this Prospectus
and in the SAI are not fundamental and therefore may be changed by the Trustees
without shareholder approval. There can be no assurance that the Fund will
achieve its investment objectives. The different types of securities and
investment techniques used by the Fund involve varying degrees of risk. For
information about the particular risks associated with each type of investment,
see "Risk Factors and Investment Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction described in this
Prospectus or in the SAI states a maximum percentage of assets that may be
invested in a security or other asset, or describes a policy regarding quality
standards, that percentage limitation or standard will, unless otherwise
indicated, apply to the Fund only at the time a transaction takes place. Thus,
if a percentage limitation is adhered to at the time of investment, a later
increase or decrease in the percentage that results from circumstances not
involving any affirmative action by the Fund will not be considered a violation.
The Fund invests in money market instruments maturing within thirteen months
or less and maintains a portfolio with a dollar-weighted average maturity of 90
days or less. By purchasing such short-term securities, the Fund will attempt to
maintain a constant net asset value of $1.00 per share. The Fund's portfolio of
investments is actively monitored on a daily basis to maintain competitive
yields on investments.
The Fund will invest in the following categories of money market
instruments: (i) debt securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; (ii) obligations (including certificates of
deposit and bankers' acceptances) of domestic banks and savings and loan
associations; (iii) high-quality commercial paper that at the time of purchase
is rated at least A-2 by Moody's Investors Service, Inc. ("Moody's") or P-2 by
Standard and Poor's Corporation ("S&P") or, if unrated, is issued or guaranteed
by a corporation with outstanding debt rated AA or higher by S&P or Aa or higher
by Moody's or which is judged by IMI to be of at least equivalent quality; (iv)
short-term corporate notes, bonds and debentures that at the time of purchase
are rated at least Aa by Moody's or AA by S&P or that are judged by IMI to be of
at least equivalent quality; and (v) repurchase agreements with domestic banks
for periods not exceeding seven days and only with respect to
3
<PAGE> 100
U.S. Government securities that throughout the period have a value at least
equal to the amount of the loan (including accrued interest).
The securities in which the Fund invests must present minimal credit risk
and be rated in one of the two highest short-term rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations ("NRSROs") assigning a rating to the securities or issuer, or if
only one NRSRO has assigned a rating, by that agency or determined to be of
equivalent value by IMI. Purchases of securities that are rated by only one
NRSRO must be previously approved or ratified subsequently by the Trustees.
Securities that are rated in the highest short-term rating category by at least
two NRSROs (or that have been issued by an issuer that is rated with respect to
a class of short-term debt obligations, or any security within that class,
comparable in priority and quality with such securities) are designated "First
Tier Securities." Securities rated in the two highest short-term rating
categories by at least two NRSROs, but which are not rated in the highest
category by two or more NRSROs, are designated "Second Tier Securities." IMI
shall determine whether a security presents minimal credit risk under procedures
adopted by the Board of Trustees.
The Fund may not invest more than 5% of its total assets in the securities
of any one issuer. This limitation shall not apply to U.S. Government
securities. Further, the Fund will not invest more than the greater of 1% of its
total assets or one million dollars in the securities of a single issuer that
were Second Tier Securities when acquired by the Fund. In addition, the Fund may
not invest more than 5% of its total assets in securities that are Second Tier
Securities when acquired by the Fund. As a fundamental policy, the Fund may not
borrow money, except for temporary purposes, and then only in an amount not
exceeding 10% of the value of the Fund's total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
DEBT SECURITIES, IN GENERAL: Investment in debt securities involves both
interest rate and credit risk. Generally, the value of debt instruments rises
and falls inversely with fluctuations in interest rates. As interest rates
decline, the value of debt securities generally increases. Conversely, rising
interest rates tend to cause the value of debt securities to decrease. Bonds
with longer maturities generally are more volatile than bonds with shorter
maturities. The market value of debt securities also varies according to the
relative financial condition of the issuer. In general, lower-quality bonds
offer higher yields due to the increased risk that the issuer will be unable to
meet its obligations on interest or principal payments at the time called for by
the debt instrument.
INVESTMENT GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics).
U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of,
or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates,
which are mortgage-backed securities). When such securities are held to
maturity, the payment of principal and interest is unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible credit quality.
U.S. Government securities that are not held to maturity are subject to
variations in market value caused by fluctuations in interest rates.
Mortgage-backed securities are securities representing part ownership of a
pool of mortgage loans. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the loans typically
will be substantially less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the security. Conversely, rising interest rates tend to
decrease the rate of prepayment, thereby lengthening the security's actual
average life (and increasing the security's price volatility). Since it is not
possible to predict accurately the average life of a particular pool, and
because prepayments are reinvested at current rates, the market value of
mortgage-backed securities may decline during periods of declining interest
rates.
BANK OBLIGATIONS: The bank obligations in which the Fund may invest include
certificates of deposit, bankers' acceptances, and other short-term debt
obligations. Investments in certificates of deposit and bankers' acceptances are
limited to obligations of (i) banks having total assets in excess of $1 billion,
and (ii) other banks if the principal amount of such obligation is fully insured
by the Federal Deposit Insurance Corporation ("FDIC"). Investments in
certificates of deposit of savings associations are limited to obligations of
Federal or state-chartered institutions whose total assets exceed of $1 billion
and whose deposits are insured by the FDIC.
COMMERCIAL PAPER: Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. Investments in commercial paper are limited to
obligations rated Prime 1 by Moody's or A-1 by S&P or, if not rated by Moody's
or S&P, issued by companies having an outstanding debt issue currently rated Aaa
or Aa by Moody's or AAA or AA by S&P.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which the
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at an
agreed-upon yield. The Fund will not enter into a repurchase agreement with more
than seven days to maturity if, as a result, more than 10% of the Fund's net
assets would be invested in illiquid securities including such repurchase
agreements. The Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in obtaining direct
ownership of the underlying collateral and might incur a loss if the value of
the security should decline.
BORROWING: Borrowing may exaggerate the effect on the Fund's net asset
value of any increase or decrease in the value of the Fund's portfolio
securities. Money borrowed will be subject to interest costs (which may include
commitment fees and/or the cost of maintaining minimum average balances).
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate, diversified portfolio of the Trust, an
open-end management investment company organized as a Massachusetts business
trust on December 21, 1983. The business and affairs of the Fund are
4
<PAGE> 101
managed under the direction of the Trustees. Information about the Trustees, as
well as the Trust's executive officers, may be found in the SAI. The Trust has
an unlimited number of authorized shares of beneficial interest, and currently
has 18 separate portfolios. The Fund has three classes of shares, designated as
Class A, Class B and Class C. The purpose of these designations is primarily to
enable the transfer agent for the Ivy funds to track the contingent deferred
sales charge period that applies to Class B and Class C shares of other Ivy
funds that are being exchanged for shares of the Fund. In all other relevant
respects, the Fund's Class A, Class B and Class C shares are identical (i.e.,
having the same arrangement for shareholder services and the distribution of
securities). Shares of each class are entitled to one vote per share (with
proportionate voting for fractional shares), and have equal rights as to voting,
redemption, dividends and liquidation.
The Trust employs IMI to provide business management and investment advisory
services; Mackenzie Investment Management Inc. ("MIMI") to provide
administrative and accounting services; Ivy Mackenzie Distributors, Inc.
("IMDI") to distribute the Fund's shares; and Ivy Mackenzie Services Corp.
("IMSC") to provide transfer agent and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI. As of March 31,
1998, IMI and MIMI had approximately $3.9 billion and $1.3 billion,
respectively, in assets under management. MIMI is a subsidiary of Mackenzie
Financial Corporation ("MFC"), which has been an investment counsel and mutual
fund manager in Toronto, Ontario, Canada for more than 31 years.
INVESTMENT MANAGER
For IMI's business management and investment advisory services, the Fund
pays IMI a fee that is accrued daily and paid monthly, based on the Fund's daily
net assets. The fee is equal, on an annual basis, to 0.40% of the Fund's average
net assets.
IMI pays all expenses it incurs in rendering management services to the
Fund. The Fund bears its cost of operations. General expenses of the Trust that
are not readily identifiable as belonging to a particular series of the Trust
(or a particular class thereof) are allocated among and charged to each series
based on its relative net asset size. Expenses that are attributable to a
particular Fund (or class thereof) will be borne solely by that Fund (or class)
directly.
IMI currently limits the Fund's total operating expenses (excluding
interest, taxes, litigation and indemnification expenses, and other
extraordinary expenses) to an annual rate of 0.85% of the Fund's average net
assets. As long as the Fund's expense limitation continues, it may lower the
Fund's expenses and increase its yield. The Fund's expense limitation may be
terminated or revised at any time, at which time the Fund's expenses may
increase and its yield may be reduced.
PORTFOLIO MANAGEMENT: The Money Market Fund is managed using a team
approach. Michael Borowsky has been a member of the team since 1994. Prior to
joining Ivy Mackenzie, Mr. Borowsky was a fixed income specialist at Lehwald,
Orosey and Pepe. He holds a Bachelor of Science degree in finance and economics
from Drexel University.
Brian Barrett joined the Ivy Money Market team in 1997. His experience
includes working with Mellon Bond Associates as Vice President and Director of
Research in 1987-1988. In this capacity he was a member of the Mellon Bank Trust
Investment Committee which oversaw $190 billion of trust and custodial funds.
Concurrent with his tenure at Ivy, Dr. Barrett is an Associate Professor of
Finance at the University of Miami (Florida). Dr. Barrett is a Chartered
Financial Analyst and holds a Ph.D in finance from the Georgia Institute of
Technology.
Michael G. Landry, Chairman and Director of Ivy Management, Inc., was
president of the Fund from 1987 to 1996. From 1997 to present, Mr. Landry is
Chairman of Ivy Money Market and is responsible for establishing the overall
investment strategy of the Fund. Prior to joining the firm, Mr. Landry was a
Senior Vice President and portfolio manager with Templeton International. He has
more than 25 years of professional investment experience. Mr. Landry has a
degree in economics from Carleton University.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Fund, such as
maintaining the registration of Fund shares under state "Blue Sky" laws and
assisting with the preparation of Federal and state income tax returns,
financial statements and periodic reports to shareholders. MIMI also assists the
Trust's legal counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this arrangement, the
Fund's net assets are subject to a fee, accrued daily and paid monthly, at the
annual rate of 0.10%.
MIMI also provides certain accounting and pricing services for the Fund (see
"Fund Accounting Services" in the SAI for more information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Fund, and also
provides certain shareholder-related services. Certain broker-dealers that
maintain shareholder accounts with the Fund through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment Advisory and
Other Services" in the SAI).
DIVIDENDS AND TAXES
Distributions you receive from the Fund are reinvested in additional Fund
shares of the same class unless you elect to receive them in cash. If you elect
the cash option and the U.S. Postal Service cannot deliver your checks, your
election will be converted to the reinvestment option.
TAXATION: The following discussion is intended for general information
only. You should consult with your tax advisor as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund
under applicable state or local law.
The Fund intends to qualify annually a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"). To qualify, the Fund
must meet certain income, distribution and diversification requirements. In any
year in which the Fund qualifies as a regulated investment company and timely
distributes all of its taxable income, the Fund generally will not pay any
Federal income or excise tax.
Dividends paid out of the Fund's investment company taxable income
(including dividends, interest and net short-term capital gain) will be taxable
to a shareholder as ordinary income. Because no portion of the Fund's income is
expected to consist of dividends paid by U.S. corporations, no portion of the
dividends paid by the Fund is expected to be eligible for the corporate
dividends-received deduction. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), if any, are
taxable at a maximum 20% or 28% capital gains rate, regardless of how long the
shareholder has held the Fund's shares. Dividends are taxable to shareholders in
the same manner whether received in cash or reinvested in additional Fund
shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
5
<PAGE> 102
with a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Each year the Fund will notify shareholders of the tax status of dividends
and distributions.
Investments in securities that are issued at a discount will result in
income to the Fund each year equal to a portion of the excess of the face value
of the securities over their issue price, even though the Fund receives no cash
interest payments from the securities.
Shareholders generally are not expected to realize any gain or loss upon a
disposition of shares of the Fund, as long as the Fund maintains a constant net
asset value per share. In the unlikely event that the Fund were unable to do so,
any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally would be a capital gain or loss which might be eligible for
reduced Federal tax rates, generally depending upon the shareholder's holding
period for the shares.
The Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service
("IRS") that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes. Fund
distributions that are derived from interest on obligations of the U.S.
Government and certain of its agencies, authorities and instrumentalities may be
exempt from state and local taxes in certain states. You should consult with
your tax advisor regarding the particular tax consequences of an investment in
the Fund. Further information relating to tax consequences is contained in the
SAI.
PERFORMANCE DATA
Comparative performance information may be used from time to time in
advertising or marketing the shares of the Fund, including data from Lipper
Analytical Services, Inc., Donoghue's Money Fund Report, The Bank Rate Monitor,
other industry publications, business periodicals, rating services and market
indices. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO
SUGGEST FUTURE RESULTS.
The yield of a Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then annualized; that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52 week
period and is shown as a percentage of the investment.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account Application on the last
page of this Prospectus. Make your check payable to Ivy Money Market Fund. No
third party checks will be accepted. Deliver these items to your registered
representative or selling broker, or send them to one of the addresses below:
Regular Mail:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Courier:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
The Fund reserves the right to reject, for any reason, any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment is $1,000; the
minimum additional investment is $100. Initial or additional amounts for
retirement accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at any time through
any of the following options:
By Mail: Complete the investment slip attached to your statement, or write
instructions, including the account registration, Fund number and account number
of the shares you wish to purchase. Send your check (payable to Ivy Money Market
Fund), along with your investment slip or written instructions, to one of the
addresses above.
Through your Broker: Deliver the investment slip attached to your
statement, or written instructions, along with your payment to your registered
representative or selling broker.
By Wire: Purchases may also be made by wiring money from your bank account
to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as
follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
By Automatic Investment Method: Complete Sections 6A and 7B on the Account
Application (see "Automatic Investment Method" on page 10 for more information.
DIRECT PURCHASES OF CLASS B AND CLASS C SHARES: Class B and Class C shares
may be purchased directly through your election of a systematic withdrawal plan
under which specified withdrawal amounts are used to purchase Class B or Class C
shares of a different Ivy fund. This arrangement is designed to take advantage
of dollar-cost averaging as a method of investment. To establish this type of
arrangement, complete section 6B of the Account Application.
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price is the net asset value per share ("NAV"). Share
purchases will be made at the next determined price after the purchase order is
received. The price is effective for orders received by IMSC or by your
registered securities dealer prior to the time of the determination of the net
asset value. Any orders received after the time of the determination of the net
asset value will be entered at the next calculated price.
Orders placed with a securities dealer before the net asset value is
determined and that are transmitted through the facilities of the National
Securities Clearing Corporation on the same day are confirmed at that day's
price. Any loss resulting from the dealer's failure to submit an order by the
deadline will be borne by that dealer.
You will receive an account statement after any purchase, exchange or full
liquidation. Statements related to reinvestment of dividends or capital gains,
6
<PAGE> 103
automatic investment plans (see the SAI for further explanation) and/or
systematic withdrawal plans will be sent quarterly.
HOW THE FUND VALUES ITS SHARES
The Fund offers three classes of shares in this Prospectus, designated as
Class A, Class B and Class C shares. The NAV per share is the value of one Class
A, Class B, or Class C share. The NAV is determined for each Class of shares as
of the close of the New York Stock Exchange on each day the Exchange is open by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding, adjusted to the nearest
cent.
For purposes of determining the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. The Fund values all of
its portfolio securities using the amortized cost method, which involves valuing
a security at cost on the date of acquisition and thereafter assuming a constant
rate of accretion of discount or amortization of premium. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. During such periods, the yield to an investor
in the Fund may differ somewhat from that obtained in a similar investment
company which uses available market quotations to value all of its portfolio
securities.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your registered securities
representative, by mail, by telephone or by check writing. All redemptions are
made at the NAV next determined after a redemption request has been received in
good order. Requests for redemptions must be received by 4:00 p.m. Eastern time
to be processed at the NAV for that day. Any redemption request in good order
that is received after 4:00 p.m. Eastern time will be processed at the price
determined on the following business day. The Fund does not assess a CDSC.
However, if the shares of another Ivy fund that are subject to a CDSC are
exchanged for shares (of the same class) of the Fund, the CDSC will carry over
to the investment in the Fund and may be assessed upon redemption.
When shares are redeemed, the Fund will normally send redemption proceeds to
you on the next business day, but may take up to seven business days (or longer
in the case of shares recently purchased by check). Unless otherwise requested,
your redemption proceeds will be mailed in the form of a check to your address
of record. Under unusual circumstances, the Fund may suspend redemptions or
postpone payment to the extent permitted by Federal securities laws. The
proceeds of the redemption may be more or less than the purchase price of your
shares, depending upon, among other factors, the market value of the Fund's
securities at the time of the redemption. If the redemption is for over $50,000,
or the proceeds are to be sent to an address other than the address of record,
or an address change has occurred in the last 30 days, it must be requested in
writing with a signature guarantee. See "Signature Guarantees" below.
If you are not certain of the requirements for a redemption, please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: Your Dealer is responsible for
promptly transmitting redemption orders. Redemptions requested by dealers will
be made at the NAV (less any applicable CDSC) determined at the close of regular
trading (4:00 p.m. Eastern time) on the day that a redemption request is
received in good order by IMSC.
BY MAIL: Requests for redemption in writing are considered to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the account registration, the Fund
number, the account number, the address and the dollar amount or number of
shares to be redeemed.
- Signatures of all registered owners whose names appear on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the case of estates,
trusts, guardianships, corporations, retirement plans or others acting in
representative capacities).
The dollar amount or number of shares indicated for redemption must not
exceed the available shares or NAV of your account at the next-determined
prices. If your request exceeds these limits, then the trade will be rejected in
its entirety.
Mail your request to IMSC at one of the addresses on page 6 of this
Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per
day over the telephone by contacting IMSC at 1-800-777-6472. In times of unusual
economic or market changes, the telephone redemption privilege may be difficult
to implement. If you are unable to execute your transaction by telephone, you
may want to consider placing the order in writing and sending it by mail or
overnight courier.
Checks will be made payable to the current account registration and sent to
the address of record. If there has been a change of address in the last 30
days, please use the instructions for redemption requests by mail described
above. A signature guarantee would be required.
Requests for telephone redemptions will be accepted from the registered
owner of the account, the designated registered representative or the registered
representative's assistant.
Shares held in certificate form cannot be redeemed by telephone.
If Section 6E of the Account Application is not completed, telephone
redemption privileges will be provided automatically. Although telephone
redemptions may be a convenient feature, you should realize that you may be
giving up a measure of security that you may otherwise have if you terminated
the privilege and redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so on your
behalf, you must notify IMSC in writing.
The Fund employs reasonable procedures that require personal identification
prior to acting on redemption instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, the Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE: For shareholders who
established this feature at the time they opened their account, telephone
instructions will be accepted for redemption amounts up to $50,000 ($1,000
minimum) and proceeds will be wired on the next business day to a predesignated
bank account.
In order to add this feature to an existing account or to change existing
bank account information, please submit a letter of instructions including your
bank information to IMSC at the address provided above. The letter must be
signed by all registered owners, and their signatures must be guaranteed. See
"Signature Guarantees" below.
Your account will be charged a $10 fee each time redemption proceeds are
wired to your bank. Your bank may also charge you a fee for receiving a Federal
Funds wire.
7
<PAGE> 104
Neither IMSC nor the Fund can be responsible for the efficiency of the
Federal Funds wire system or the shareholder's bank.
BY CHECK WRITING: The check writing privilege is only available to Class A
shareholders and is not available for retirement accounts. You may write checks
against your Fund account. Checks written must be for a minimum of $100. You may
sign up for this option by completing Section 8 of the Account Application. IF
YOU ARE REDEEMING SHARES THAT HAVE BEEN PURCHASED BY CHECK, PAYMENT MAY BE
DELAYED UNTIL YOUR CHECK HAS CLEARED OR FOR UP TO 15 CALENDAR DAYS AFTER THE
DATE OF PURCHASE. Please note that all registered owners named on the account
must sign the signature card, and only registered owners may have the check
writing privilege on an account.
In order to qualify for the check writing privilege, Class A shareholders
must maintain a minimum average account balance of $1,000. Shares must be
uncertificated (i.e., held by the Fund) for any account requesting check writing
privileges. Checks can be reordered by calling IMSC at 1-800-777-6472. Checking
activity is reported on your statement, and canceled check copies are returned
to you each month. There is no limitation on the number of checks a shareholder
may write.
When a check is presented for payment, the Fund redeems a sufficient number
of shares to cover the amount of the check. Checks written on accounts with
insufficient shares will be returned to the payee marked "non-sufficient funds."
There may be a nominal charge for each supply of checks, copies of canceled
checks, stop payment orders, checks drawn for amounts less than the Fund minimum
(i.e., $100) and checks returned for "non-sufficient funds." To pay for these
charges, the Fund automatically redeems an appropriate number of the
shareholder's Fund shares after the charges are incurred.
You may not close your Fund account by writing a check, because any earned
dividends will remain in your account. The Fund reserves the right to change,
modify or terminate the check writing service at any time upon notification
mailed to your address of record.
Your account will be charged a $10 fee each time redemption proceeds are
wired to your bank.
Neither IMSC nor the Fund can be responsible for the efficiency of the
Federal Funds wire system or the shareholder's bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and subject to state law
requirements, the Fund may redeem the accounts of shareholders whose investment,
including sales charges paid, has been less than $1,000 for more than 12 months.
The Fund will not redeem an account unless the shareholder has been given at
least 60 days' advance notice of the Fund's intention to do so. No redemption
will be made if a shareholder's account falls below the minimum due to a
reduction in the value of the Fund's portfolio securities. This provision does
not apply to IRA's, other retirement accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions, we require a
signature guarantee in order to accommodate the following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank account (if this
option was not selected on your original application, or if you are
changing the bank wire information).
A signature guarantee may be obtained only from an eligible guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended. An eligible guarantor institution includes banks, brokers, dealers,
municipal securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. The
signature guarantee must not be qualified in any way. Notarizations from notary
publics are not the same as signature guarantees, and are not accepted.
Circumstances other than those described above may require a signature
guarantee. Please contact IMSC at 1-800-777-6472 for more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are
automatically reinvested at NAV in additional shares of the same class of the
Fund unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital gains are
automatically invested at NAV in another Ivy fund of the same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in
cash. Capital gains will be reinvested at NAV in additional shares of the same
class of the Fund or another Ivy or Mackenzie fund of the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will
be paid in cash.
If you wish to have your cash distributions deposited directly to your bank
account via electronic funds transfer ("EFT"), or if you wish to change your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address other than the
address of record, you must provide IMSC with a letter of instruction, signed by
all registered owners with signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal backup withholding
tax on dividends, capital gain distributions and, in the event the Fund failed
to maintain a constant NAV per share, redemption proceeds, you must furnish the
Fund with your certified tax identification number ("TIN") and certify that you
are not subject to backup withholding due to prior under-reporting of interest
and dividends to the IRS. If you fail to provide a certified TIN, or such other
tax-related certifications as the Fund may require, within 30 days of opening
your new account, the Fund reserves the right to involuntarily redeem your
account and send the proceeds to the address of record.
You can avoid the above withholding and/or redemption by correctly
furnishing your TIN, and making certain certifications, in Section 2 of the
8
<PAGE> 105
Account Application at the time you open your new account, unless the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt from backup
withholding. Please complete IRS Form W-9 with the Account Application to claim
the exemption. If the registration is for a UGMA/UTMA account, please provide
the social security number of the minor. Alien individuals must furnish their
individual TIN on a completed IRS Form W-9. Other non-U.S. investors who are not
required to have a TIN must provide, with the Account Application, a completed
IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions, most
shareholders elect not to receive certificates. Should you wish to have a
certificate issued, please contact IMSC at 1-800-777-6472 and request that one
be sent to you. (Retirement plan accounts are not eligible for this service.)
Please note that if you were to lose your certificate, you would incur an
expense to replace it.
Certificates for shares valued up to $50,000 will be issued to the current
registration and mailed to the address of record. Should you wish to have your
certificates mailed to a different address, or registered differently from the
current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange privilege with other Ivy funds
(except Ivy International Fund unless they have an existing Ivy International
Fund account). The Fund reserves the right to reject, for any reason, any
exchange order.
Class A shareholders of the Fund may exchange their outstanding shares for
Class A shares of another Ivy fund on the basis of the relative NAV per Class A
share, plus an amount equal to the sales charge payable with respect to the new
shares at the time of the exchange. Incremental sales charges are waived for
outstanding shares that have been invested for 12 months or longer. Shareholders
who have purchased Class B (or Class C) shares of the Fund directly may exchange
their Class B (or Class C) shares for Class B (or Class C) shares of another Ivy
fund on the basis of the relative NAV per Class B (or Class C) share (see
"Direct Purchases of Class B and Class C Shares" under "How to Buy Shares"),
subject to the CDSC schedule (or period) of the fund into which the exchange is
being made (beginning with the date of the exchange).
Class B and Class C shareholders of another Ivy fund may exchange their
shares for Class B and Class C shares of the Fund. Exchanges from another Ivy
Fund will continue to be subject to the CDSC schedule (or period) of the fund
from which the exchange was made, but will reflect the time the shares are held
in the Fund.
Class A, Class B and Class C shares that have been acquired as a result of
the reinvestment of dividends and other distributions will not be charged an
initial sales charge or a CDSC when exchanged into another Ivy fund.
Exchanges are considered to be taxable events, and may result in a capital
gain or a capital loss for tax purposes. Before executing an exchange, you
should obtain and read the prospectus and consider the investment objective of
the fund into which the exchange is being made. Shares must be unissued (i.e.,
held by a Fund) in order to execute an exchange. Exchanges are available only in
states where they can be legally made. This privilege is not intended to provide
shareholders a means by which to speculate on short-term movements in the
market. Exchanges are accepted only if the registrations of the two accounts are
identical. Amounts to be exchanged must meet minimum investment requirements for
the Ivy fund into which the exchange is made. It is the policy of the Funds to
discourage the use of the exchange privilege for the purpose of timing
short-term market fluctuations. To protect the interests of other shareholders
of a Fund, a Fund may cancel the exchange privileges of any persons that, in the
opinion of the Fund, are using market timing strategies or are making more than
five exchanges per owner or controlling person per calendar year.
With respect to Fund shares subject to a CDSC (i.e., Class B or Class C
shares acquired through an exchange from another Ivy fund), if less than all of
an investment is exchanged out of the Fund, the shares exchanged will reflect,
pro rata, the cost, capital appreciation and/or reinvestment of distributions of
the original investment as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged shares.
Investors who held Ivy Fund shares as of December 31, 1991, or who held
shares of certain funds that were reorganized into an Ivy fund, may be exempt
from sales charges on the exchange of shares between any of the Ivy funds. If
you believe you may be eligible for such an exemption, please contact IMSC at
1-800-235-3322 for additional information.
EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not
completed, telephone exchange privileges will be provided automatically.
Although telephone exchanges may be a convenient feature, you should realize
that you may be giving up a measure of security that you may otherwise have if
you terminated the privilege and exchanged your shares in writing. If you do not
wish to make telephone exchanges or let your registered representative do so on
your behalf, you must notify IMSC in writing.
In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have
the account number of your current fund and the exact name in which it is
registered available to give to the telephone representative.
The Fund employs reasonable procedures that require personal identification
prior to acting on exchange instructions communicated by telephone to confirm
that such instructions are genuine. In the absence of such procedures, the Fund
may be liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and provide the
following information:
- The name of the fund whose shares you currently own.
- Your account number
- The name(s) in which the account is registered.
- The name of the fund into which you wish to exchange your existing shares.
- The number of shares or the dollar amount you wish to exchange.
The request must be signed by all registered owners.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by completing
Section 6B of the Account Application. You can also obtain this application by
contacting your registered representative or IMSC at 1-800-777-6472. To be
eligible, you must have at least $5,000 in your account. Payments (minimum
distribution amount -- $50) from your account can be made monthly, quarterly,
semi-annually, annually or on a selected monthly basis, to yourself or any other
designated payee. You may elect to have your systematic withdrawal paid
9
<PAGE> 106
directly to your bank account via EFT. Share certificates must be unissued
(i.e., held by the Fund) while the Systematic Withdrawal Plan is in effect. A
Systematic Withdrawal Plan may not be established if you are currently
participating in the Automatic Investment Method. For more information, please
contact IMSC at 1-800-777-6472.
If payments you receive through the Systematic Withdrawal Plan exceed the
dividends and capital appreciation of your account, you will be reducing the
value of your account. Additional investments made by shareholders participating
in the Systematic Withdrawal Plan must equal at least $1,000 while the plan is
in effect. In addition, redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan are derived from
the redemption of shares in your account. Any applicable CDSC will be assessed
upon redemption. A CDSC will not be assessed on withdrawals not exceeding 12%
annually of the initial account balance when the Systematic Withdrawal Plan was
started.
Should you wish at any time to add a Systematic Withdrawal Plan to an
existing account or change payee instructions, you will need to submit a written
request, signed by all registered owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn each month from
your bank for investment in Fund shares by completing Sections 6A and 7B of the
Account Application. Attach a "voided" check to your account application. At
pre-specified intervals, your bank account will be debited and the proceeds will
be credited to your Ivy account. The minimum investment under this plan is $50
per month ($25 per month for retirement plans). There is no charge to you for
this program.
You may terminate or suspend your Automatic Investment Method by telephone
at any time by contacting IMSC at 1-800-777-6472.
If you have investments being withdrawn from a bank account and we are
notified that the account has been closed, your Automatic Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy fund accounts having the same TIN will
receive a single quarterly account statement, unless otherwise specified. This
feature consolidates the activity for each account onto one statement. Requests
for quarterly consolidated statements for all other accounts must be submitted
in writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy family of funds offer several tax-sheltered retirement plans that
may fit your needs:
- Traditional and Roth IRAs
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans are $25.
Investors Bank & Trust, which serves as custodian or trustee under the
retirement plan prototypes available from the Fund, charges certain nominal fees
for annual maintenance. A portion of these fees is remitted to IMSC, as
compensation for its services to the retirement plan accounts maintained with
the Fund.
Distributions from retirement plans are subject to certain requirements
under the Code. Certain documentation, including IRS Form W-4P, must be provided
to IMSC prior to taking any distribution. Please contact IMSC for details. The
Ivy family of funds and IMSC assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws, and will not be
responsible for any penalties assessed. For additional information, please
contact your broker, tax advisor or IMSC.
Please call IMSC at 1-800-777-6472 for complete information kits describing
the plans and their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to IMSC at 1-800-777-6472.
10
<PAGE> 107
ACCOUNT APPLICATION
------------------------
ACCOUNT NUMBER
IVY MONEY MARKET FUND
PLEASE MAIL APPLICATIONS AND CHECKS TO: Ivy Mackenzie Services Corp., P.O. Box
3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for which Ivy is
custodian.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
101/ 1 / 2 1 / 2
FUND ------------------- ---------- ---------- ---------- ---------- ---------- ----------
USE Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd
ONLY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0 / 1 0 / X
FUND ---------- ----------
USE Exc Cd Red Cd
ONLY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 REGISTRATION
[ ] Individual
[ ] Joint Tenant --------------------------------------------------------------------------------------------
[ ] Estate Owner, Custodian or Trustee
[ ] UGMA/UTMA --------------------------------------------------------------------------------------------
[ ] Corporation Co-owner or Minor
[ ] Partnership --------------------------------------------------------------------------------------------
[ ] Sole Proprietor Minor's State of Residence
[ ] Trust --------------------------------------------------------------------------------------------
Street
-----------------
Date of Trust --------------------------------------------------------------------------------------------
City State Zip Code
[ ] Other
-----------
-----------------
- - - -
------------------------------ ---------------------------------
Phone Number -- Evening Phone Number -- Day
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2 TAX ID # - - or Citizenship [ ] U.S. [ ] Other
------------------------------- ------------------------------- ------
Social Security Number Tax Identification Number
UNDER PENALTIES OF PERJURY, I CERTIFY BY SIGNING IN SECTION 9 BELOW THAT: (1) THE NUMBER SHOWN IN THIS SECTION IS
MY CORRECT TAXPAYER IDENTIFICATION NUMBER (TIN), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I HAVE
NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (B) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. (CROSS OUT ITEM (2) IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.) PLEASE SEE THE "TAX IDENTIFICATION
NUMBER" SECTION OF THE PROSPECTUS FOR ADDITIONAL INFORMATION ON COMPLETING THIS SECTION.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3 DEALER The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the signature and
INFORMATION legal capacity of the Shareholder, and agrees to notify MIISC of any purchases made under a Letter of Intent or
Rights of Accumulation.
--------------------------------------------------------------- ----------------------------------------
Dealer Name Representative's Name and Number
--------------------------------------------------------------- ----------------------------------------
Branch Office Address Representative's Phone Number
--------------------------------------------------------------- ----------------------------------------
City State Zip Code Authorized Signature of Dealer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made payable to Ivy Money Market Fund. Please invest it in [ ] Class A
[ ] Class B* or [ ] Class C* shares.
$ --------------- (Amount Enclosed)
* Direct purchases of Class B and Class C shares may be made in conjunction with a systematic withdrawal plan
into the same Class of a different Ivy or Mackenzie fund. (See " Direct Purchases of Class B and Class C
Shares" under "How To Buy Shares.")
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 DISTRIBUTION A. I would like to reinvest dividends and capital gains into additional shares in this account at net asset value
OPTIONS unless a different option is checked below.
B. [ ] Reinvest all dividends and capital gains into additional shares of a different Ivy fund.
-------------------------------- ---------------------------------
Fund Name Account Number [ ] New Account
C. [ ] Pay all dividends in cash and reinvest capital gains into additional shares in this Fund or a different Ivy
fund.
-------------------------------- -------------------------- [ ] New Account
Fund Name Account Number
D. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ]
(By Mail)
7B [ ]
(By E.F.T.)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 108
- --------------------------------------------------------------------------------
6 OPTIONAL SPECIAL FEATURES
- --------------------------------------------------------------------------------
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
<TABLE>
<S> <C>
I wish to invest: My bank account will be debited on or about the:
[ ] Annually _________________ day of the month of __________
[ ] Semi-Annually _________________ day of the months of __________ and __________
[ ] Quarterly _________________ day of the [ ] first month of each calendar quarter
[ ] second
[ ] third
[ ] Monthly
[ ] once per month ________ day of the month*
[ ] twice ________ day of the month*
[ ] 3 times ________ day of the month*
[ ] 4 times ________ day of the month*
</TABLE>
Please invest $ _________________ each period starting in the month of
Dollar Amount
______________ in Ivy Money Market Fund.
Month
[ ] I have attached a voided check to ensure my correct bank account
will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS**
Class: I wish to automatically withdraw funds from my account in Ivy
Money Market Fund: [ ] Class A Shares [ ] Class B Shares
[ ] Class C Shares
<TABLE>
<S> <C> <C> <C> <C> <C>
Frequency: [ ] Monthly If monthly, withdraw funds: [ ] One per month
[ ] Quarterly [ ] Twice per month
[ ] Semi-Annually [ ] 3 times per month
[ ] Annually [ ] 4 times per month
<CAPTION>
<S> <C> <C>
Payment Method: I request the withdrawal to be: [ ] Sent to the address listed in the registration
[ ] Sent to the special payee listed in Section 7A
[ ] Invested as part of a dollar-cost averaging
program into additional shares of another
Ivy fund (fill out information below)
</TABLE>
If part of a dollar-cost
averaging program:_________________________ |_|_|_|_|_|_|_|_|_|_|
Ivy fund to be invested Account Number
<TABLE>
<S> <C>
Amount/Start Date: $_________________, starting on or about the ________ day of the __________________________
month*
________ day of the __________________________
month
________ day of the __________________________
month
________ day of the __________________________
month
</TABLE>
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS**
I authorize the Agent to honor telephone instructions for the
redemption of Fund shares up to $50,000. Proceeds may be wire
transferred to the bank account designated ($1,000 minimum).
Shares issued in certificate form may not be redeemed under
this privilege. (COMPLETE SECTION 7B)
D. [ ] TELEPHONE EXCHANGES** [ ] Yes [ ] No
I authorize exchanges by telephone among the Ivy and Mackenzie
family of funds upon instructions from any person as more fully
described in the Prospectus. To change this option once
established, written instructions must be received from the
shareholder of record or the current registered representative.
If neither box is checked, the telephone exchange privilege
will be provided automatically.
E. [ ] TELEPHONE REDEMPTIONS** [ ] Yes [ ] No
The Fund or its agents are authorized to honor telephone
instructions from any person as more fully described in the
Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be
payable to the shareholder of record and mailed to the address
of record. To change this option once established, written
instructions must be received from the shareholder of record or
the current registered representative.
If neither box is checked, the telephone redemption privilege
will be provided automatically.
* There must be a period of at least seven calendar days between each
investment/withdrawal period.
** This option may not be selected if shares are in certificate form.
- --------------------------------------------------------------------------------
7 SPECIAL PAYEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION
Please send all disbursements to this
special payee ------------------------------------------------------------
Financial Institution
------------------------------------------
Name of Bank or Individual --------------------------- ----------------------------
ABA # Account #
------------------------------------------
Account Number (If Applicable) ------------------------------------------------------------
Street
------------------------------------------
Street ------------------------------------------------------------
City/State/Zip
------------------------------------------ (Please attach a voided check)
City/State/Zip
</TABLE>
- --------------------------------------------------------------------------------
8 CHECK WRITING ENROLLMENT FORM
- --------------------------------------------------------------------------------
THIS FEATURE IS AVAILABLE TO CLASS A SHAREHOLDERS ONLY. CHECKS MUST BE
WRITTEN FOR A MINIMUM OF $100. Shares purchased in the Fund may be
subject to a holding period of up to 15 calendar days before being
redeemed by check. Please see the Prospectus for details.
HOW TO ENROLL
1. ALL REGISTERED OWNERS MUST SIGN THIS FORM IN THE SPACE PROVIDED BELOW.
2. Check the appropriate Number of Signatures Required box to indicate
the number of signatures required when writing checks.
NUMBER OF SIGNATURES REQUIRED
[ ] One signature is required
[ ] More than one signature is required _____________________________
number of signatures required
[ ] All signatures are required
IF NONE OF THE ABOVE IS CHECKED THEN ALL SIGNATURES WILL BE REQUIRED
------------------------------------------------- ----------------------
Authorized Signature Date
------------------------------------------------- ----------------------
Authorized Signature Date
------------------------------------------------- ----------------------
Authorized Signature Date
- --------------------------------------------------------------------------------
9 SIGNATURES
- --------------------------------------------------------------------------------
Investors should be aware that the failure to check the "No" under
Sections 6D and 6E above means that the Telephone
Exchanges/Redemptions Privileges will be provided. The Fund employs
reasonable procedures that require personal identification prior to
acting on exchange/redemption instructions communicated by telephone
to confirm that such instructions are genuine. In the absence of such
procedures, the Fund may be liable for any losses due to unauthorized
or fraudulent telephone instructions. Please see "Exchange Privilege"
and "How to Redeem Shares" in the Prospectus for more information on
these privileges.
I certify to my legal capacity to purchase or redeem shares of the
Fund for my own account or for the account of the organization named
in Section 1. I have received a current Prospectus and understand its
terms are incorporated in this application by reference. I am
certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
----------------------------------------------------------- ------------
Signature of Owner, Custodian, Trustee or Corporate Officer Date
----------------------------------------------------------- ------------
Signature of Joint Owner, Co-Trustee or Corporate Officer Date
- --------------------------------------------------------------------------------
01IVMXX0498 (REMEMBER TO SIGN SECTION 9)
IVY BOND FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US EMERGING GROWTH FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy South America Fund) is
diversified. This Statement of Additional Information ("SAI")
describes the Class A, B, C and I shares of the four portfolios
listed above (collectively, the "Funds," and each, a "Fund").
The other fourteen portfolios of the Trust are described in
separate SAIs.
This SAI is not a prospectus and should be read in
conjunction with the Prospectus for the Funds dated April 30,
1998 (the "Prospectus"), which may be obtained upon request and
without charge from the Trust at the Distributor's address and
telephone number printed below. The Funds also offer Advisor
Class shares, which are described in a separate prospectus and
SAI that may also be obtained without charge from the
Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 2
ADJUSTABLE RATE PREFERRED STOCKS. . . . . . . . . . . . . 2
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 3
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 3
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 3
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 3
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . 4
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 4
U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . 4
MUNICIPAL SECURITIES . . . . . . . . . . . . . . . . 5
INVESTMENT-GRADE DEBT SECURITIES . . . . . . . . . . 5
LOW-RATED DEBT SECURITIES. . . . . . . . . . . . . . 5
ZERO COUPON BONDS. . . . . . . . . . . . . . . . . . 6
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED"
SECURITIES . . . . . . . . . . . . . . . . . . . . . 7
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 7
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 8
DEPOSITORY RECEIPTS. . . . . . . . . . . . . . . . . 8
EMERGING MARKETS . . . . . . . . . . . . . . . . . . 9
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . 10
ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . 10
REAL ESTATE INVESTMENT TRUSTS (REITS) . . . . . . . . . . 11
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 11
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . 11
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 12
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 12
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 13
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 13
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 14
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 14
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . . 15
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 15
INTEREST RATE FUTURES CONTRACTS. . . . . . . . . . . 16
OPTIONS ON INTEREST RATE FUTURES CONTRACTS . . . . . 16
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS . . . . . . . . . . . . . . . . . . . . 17
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. . 17
SECURITIES INDEX FUTURES CONTRACTS. . . . . . . . . . . . 18
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 19
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . . 20
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 24
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 24
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 24
INITIAL SALES CHARGE SHARES. . . . . . . . . . . . . 24
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A . . 25
CLASS B. . . . . . . . . . . . . . . . . . . . . . . 25
CLASS C. . . . . . . . . . . . . . . . . . . . . . . 25
CLASS I. . . . . . . . . . . . . . . . . . . . . . . 26
ALL CLASSES. . . . . . . . . . . . . . . . . . . . . 26
LETTER OF INTENT. . . . . . . . . . . . . . . . . . . . . 26
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 27
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 27
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 29
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 29
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 30
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . 30
REINVESTMENT PRIVILEGE. . . . . . . . . . . . . . . . . . 30
RIGHTS OF ACCUMULATION. . . . . . . . . . . . . . . . . . 30
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 31
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 31
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 32
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 34
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 38
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 39
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 41
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 41
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 43
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 44
RULE 12B-1 DISTRIBUTION PLANS. . . . . . . . . . . . 44
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 48
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 48
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 48
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 48
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 49
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 49
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 51
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 52
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 53
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . . . . . . 54
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 55
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. . 56
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 56
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 56
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 57
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 58
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 58
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 59
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 59
YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . 60
AVERAGE ANNUAL TOTAL RETURN . . . . . . . . . . . . . . . 60
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . . 71
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 72
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . 73
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objectives and Policies" and "Risk Factors and
Investment Techniques." The different types of securities and
investment techniques used by the Funds involve varying degrees
of risk, and are described more fully under "Risk Factors,"
below.
IVY BOND FUND: Ivy Bond Fund seeks a high level of current
income by investing primarily in (i) investment grade corporate
bonds (those rated Aaa, Aa, A or Baa by Moody's Investors
Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P"), or, if unrated, are considered by IMI
to be of comparable quality) and (ii) U.S. Government securities
(including mortgage-backed securities issued by U.S. Government
agencies or instrumentalities) that mature in more than 13
months. As a fundamental policy, the Fund normally invests at
least 65% of its total assets in these fixed income securities.
For temporary defensive purposes, the Fund may invest without
limit in U.S. Government securities maturing in 13 months or
less, certificates of deposit, bankers' acceptances, commercial
paper and repurchase agreements. The Fund may also invest up to
35% of its total assets in such money market securities in order
to meet redemptions or to maximize income to the Fund while it is
arranging longer-term investments.
The Fund may invest up to 35% of its net assets in corporate
debt securities, including zero coupon bonds (subject to the
restrictions set forth below), rated Ba or below by Moody's or BB
or below by S&P, or, if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). The Fund will not invest in debt securities rated
less than C by either Moody's or S&P. During the twelve months
ended December 31, 1997, based upon the dollar-weighted average
ratings of the Fund's portfolio holdings at the end of each month
during that period, the Fund had the following percentages of its
total assets invested in debt securities rated in the categories
indicated (all ratings are by either Moody's or S&P, whichever
rating is higher): 4.5% in securities rated Aaa/AAA; 0% in
securities rated Aa/AA; 7.8% in securities rated A/A; 50.0% in
securities rated Baa/BBB; 14.4% in securities rated Ba/BB; 15.9%
in securities rated B/B; and 1.3% in securities rated Caa/CCC or
below. The asset composition of the Fund subsequent to the period
indicated may or may not approximate these figures. See
Appendix A in the SAI for a description of Moody's and S&P's
corporate bond ratings.
The Fund may invest up to 5% of its net assets in
dividend-paying common and preferred stocks (including adjustable
rate preferred stocks and securities convertible into common
stocks), municipal bonds, zero coupon bonds, and securities sold
on a "when-issued" or firm commitment basis. As a temporary
measure for extraordinary or emergency purposes, the Fund may
borrow from banks up to 10% of the value of its total assets.
The Fund may invest up to 20% of its net assets in debt
securities of foreign issuers, including non-U.S.
dollar-denominated debt securities, American Depository Receipts
("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares ("GDSs"),
Eurodollar securities and debt securities issued, assumed or
guaranteed by foreign governments or political subdivisions or
instrumentalities thereof. The Fund may also enter into forward
foreign currency contracts, but not for speculative purposes. The
Fund may not invest more than 15% of the value of its net assets
in illiquid securities.
The Fund may purchase put and call options, provided the
premium paid for such options does not exceed 10% of the Fund's
net assets. The Fund may also sell covered put options with
respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the
Fund's net assets is subject to being purchased upon the exercise
of the calls. For hedging purposes only, the Fund may engage in
transactions in interest rate futures contracts, currency futures
contracts and options on interest rate futures and currency
futures contracts.
IVY GROWTH FUND, IVY GROWTH WITH INCOME FUND, AND IVY US
EMERGING GROWTH FUND: Each Fund's principal investment objective
is long-term capital growth primarily through investment in
equity securities, with current income being a secondary
consideration. Ivy Growth with Income Fund has tended to
emphasize dividend-paying stocks more than the other two Funds.
Under normal conditions, each Fund invests at least 65% of its
total assets in common stocks and securities convertible into
common stocks. Ivy Growth Fund and Ivy Growth with Income Fund
invest primarily in common stocks of domestic corporations with
low price-earnings ratios and rising earnings, focusing on
established, financially secure firms with capitalizations over
$100 million and more than three years of operating history. Ivy
US Emerging Growth Fund invests primarily in common stocks (or
securities with similar characteristics) of small- and
medium-sized companies, both domestic and foreign, that are in
the early stages of their life cycles and that IMI believes have
the potential to become major enterprises.
All of the Funds may invest up to 25% of their net assets in
foreign equity securities, primarily those traded in European,
Pacific Basin and Latin American markets, some of which may be
emerging markets involving special risks, as described below.
Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed
for fundamental financial strength.
When circumstances warrant, each Fund may invest without
limit in investment grade debt securities (e.g., U.S. Government
securities or other corporate debt securities rated at least Baa
by Moody's or BBB by S&P, or, if unrated, are considered by IMI
to be of comparable quality), preferred stocks, or cash or cash
equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy Growth with Income Fund may invest less than 35% of its
net assets in debt securities rated Ba or below by Moody's or BB
or below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). Ivy Growth Fund may invest up to 5% of its net
assets in these low-rated debt securities. Neither Fund will
invest in debt securities rated less than C by either Moody's or
S&P. (As of December 31, 1997, neither Fund invested in low-rated
debt securities).
As a fundamental policy, each Fund may borrow up to 10% of
the value of its total assets, but only for temporary purposes
when it would be advantageous to do so from an investment
standpoint. All of the Funds may invest up to 5% of their net
assets in warrants. Each Fund may not invest more than 15% of its
net assets in illiquid securities. All of the Funds may enter
into forward foreign currency contracts. Ivy Growth Fund and Ivy
Growth with Income Fund may also invest in equity real estate
investment trusts.
Each of the Funds may write put options, with respect to not
more than 10% of the value of its net assets, on securities and
stock indices, and may write covered call options with respect to
not more than 25% of the value of its net assets. Each Fund may
purchase options, provided the aggregate premium paid for all
options held does not exceed 5% of its net assets. For hedging
purposes only, each Fund may enter into stock index futures
contracts as a means of regulating its exposure to equity
markets. A Fund's equivalent exposure in stock index futures
contracts will not exceed 15% of its total assets.
RISK FACTORS
ADJUSTABLE RATE PREFERRED STOCKS
Adjustable rate preferred stocks have a variable dividend,
generally determined on a quarterly basis according to a formula
based upon a specified premium or discount to the yield on a
particular U.S. Treasury security rather than a dividend which is
set for the life of the issue. Although the dividend rates on
these stocks are adjusted quarterly and their market value should
therefore be less sensitive to interest rate fluctuations than
are other fixed income securities and preferred stocks, the
market values of adjustable rate preferred stocks have fluctuated
and can be expected to continue to do so in the future.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, a Fund may invest in time deposits in
banks or savings and loan associations. Time deposits are
generally similar to certificates of deposit, but are
uncertificated. A Fund's investments in certificates of deposit,
time deposits, and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, (ii) U.S. banks which do not meet the $1 billion asset
requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the
"FDIC"), (iii) savings and loan associations which have total
assets in excess of $1 billion and which are members of the FDIC,
and (iv) foreign banks if the obligation is, in IMI's opinion, of
an investment quality comparable to other debt securities which
may be purchased by the particular Fund. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
BORROWING
Borrowing may exaggerate the effect on a Fund's net asset
value of any increase or decrease in the value of the Fund's
portfolio securities. Money borrowed will be subject to interest
costs (which may include commitment fees and/or the cost of
maintaining minimum average balances). Although the principal of
a Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus
increasing exposure to capital risk. All borrowings will be
repaid before any additional investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies,
corporations and finance companies. A Fund may invest in
commercial paper that is rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 by Standard & Poor's Corporation
("S&P") or, if not rated by Moody's or S&P, is issued by
companies having an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES
The convertible securities in which a Fund may invest
include corporate bonds, notes, debentures, preferred stock and
other securities that may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common
stock. Investments in convertible securities can provide income
through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or
exchange features. Because convertible securities can be
converted into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield
than the underlying equity, however, so that the price decline of
a convertible security may sometimes be less substantial than
that of the underlying equity security. The exchange ratio for
any particular convertible security may be adjusted from time to
time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio.
Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both
debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the
market value of convertible securities typically changes as the
market value of the underlying common stock changes, and,
therefore, also tends to follow movements in the general market
for equity securities. When the market price of the underlying
common stock increases, the price of a convertible security tends
to rise as a reflection of the value of the underlying common
stock, although typically not as much as the price of the
underlying common stock. While no securities investments are
without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same
issuer.
As debt securities, convertible securities are investments
that provide for a stream of income. Like all debt securities,
there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their
obligations (see following section). Convertible securities
generally offer lower yields than non-convertible securities of
similar quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
DEBT SECURITIES
IN GENERAL. Investing in debt securities involves both
interest rate and credit risk. Generally, the value of debt
instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt
securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds
with longer maturities generally are more volatile than bonds
with shorter maturities. The market value of debt securities also
varies according to the relative financial condition of the
issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury
(such as Treasury bills, notes, and bonds) and (2) Federal agency
obligations guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, which are mortgage-backed
securities). When such securities are held to maturity, the
payment of principal and interest is unconditionally guaranteed
by the U.S. Government, and thus they are of the highest possible
credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to
fluctuations in interest rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayments tends to
increase, thereby shortening the actual average life of the
security. Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the actual average life
of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates, and may involve significantly greater
price and yield volatility than traditional debt securities.
Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association and Student Loan Marketing Association.
MUNICIPAL SECURITIES. Municipal securities are debt
obligations that generally have a maturity at the time of issue
in excess of one year and are issued to obtain funds for various
public purposes. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities, or, in
some cases, from the proceeds of a special excise of a specific
revenue source. Industrial development bonds or private activity
bonds are issued by or on behalf of public authorities to obtain
funds for privately-operated facilities and are in most cases
revenue bonds that generally do not carry the pledge of the full
faith and credit of the issuer of such bonds, but depend for
payment on the ability of the industrial user to meet its
obligations (or on any property pledged as security).
The market prices of municipal securities, like those of
taxable debt securities, go up and down when interest rates
change. Thus, the net asset value per share can be expected to
fluctuate and shareholders may receive more or less than their
purchase price for shares they redeem.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is very
strong and differs from the highest rated issues only to a small
degree). Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective elements may
be lacking (i.e., such bonds lack outstanding investment
characteristics and have some speculative characteristics). A
Fund may invest in debt securities that are given an investment-
grade rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of comparable
quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa
or BBB and comparable unrated securities (commonly referred to as
"high yield" or "junk" bonds) are considered to be predominantly
speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The lower the ratings of
corporate debt securities, the more their risks render them like
equity securities. Such securities carry a high degree of risk
(including the possibility of default or bankruptcy of the
issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be
less liquid) than securities in the higher rating categories.
(See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective
characteristics.)
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issuers may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of a Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of a Fund's investment objectives by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of a Fund to retain
or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, Federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
While IMI may refer to ratings issued by established credit
rating agencies, it is not IMI's policy to rely exclusively on
such ratings, but rather to supplement such ratings with its own
independent and ongoing review of credit quality. A Fund's
achievement of its investment objective may, to the extent of its
investment in low-rated debt securities, be more dependent upon
IMI's credit analysis than would be the case if the Funds were
investing in higher quality bonds. Should the rating of a
portfolio security be downgraded, IMI will determine whether it
is in the affected Fund's best interest to retain or dispose of
the security. However, should any individual bond held by a Fund
be downgraded below a rating of C, IMI currently intends to
dispose of such bond based on then existing market conditions.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations
issued without any requirement for the periodic payment of
interest. Zero coupon bonds are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds. The
potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund
being forced to sell portfolio securities at a time when it might
otherwise choose not to sell these securities and when the Fund
might incur a capital loss on such sales. Because interest on
zero coupon obligations is not distributed to the Fund on a
current basis, but is in effect compounded, the value of such
securities of this type is subject to greater fluctuations in
response to changing interest rates than the value of debt
obligations which distribute income regularly.
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES
New issues of certain debt securities are often offered on a
"when-issued" basis, meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, the Fund
will maintain in a segregated account with its Custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date (usually
less than a year), and typically is individually negotiated and
privately traded by currency traders and their customers. A
forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between the
price at which they are buying and selling various currencies.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, at
the same time, they tend to limit any potential gain which might
result should the value of such currencies increase.
While a Fund may enter into forward contracts to reduce
currency exchange risks, changes in currency exchange rates may
result in poorer overall performance for a Fund than if it had
not engaged in such transactions. Moreover, there may be an
imperfect correlation between a Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by that Fund. An imperfect correlation of
this type may prevent a Fund from achieving the intended hedge or
expose the Fund to the risk of currency exchange loss.
A Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the
contract would obligate the Fund to deliver an amount of currency
in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Further, a Fund
generally will not enter into a forward contract with a term of
greater than one year.
A Fund will hold cash or liquid securities in a segregated
account with its Custodian in an amount equal (on a daily marked-
to-market basis) to the amount of the commitments under these
contracts. At the maturity of a forward contract, a Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an offsetting
contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a
party to the original forward contract.
FOREIGN SECURITIES
A Fund may invest in securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored American Depository
Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs"), Global Depository Shares ("GDSs")
and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in the Funds' domestic investments.
Although IMI intends to invest a Fund's assets only in
nations that are generally considered to have relatively stable
and friendly governments, there is the possibility of
expropriation, nationalization, repatriation or confiscatory
taxation, taxation on income earned in a foreign country and
other foreign taxes, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given
country), default on foreign government securities, political or
social instability or diplomatic developments which could affect
investments in securities of issuers in those nations. In
addition, in many countries there is less publicly available
information about issuers than is available for U.S. companies.
Moreover, foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to
those applicable to U.S. companies. In many foreign countries,
there is less governmental supervision and regulation of business
and industry practices, stock exchanges, brokers, and listed
companies than in the United States. Foreign securities
transactions may also be subject to higher brokerage costs than
domestic securities transactions. The foreign securities markets
of many of the countries in which a Fund may invest may also be
smaller, less liquid and subject to greater price volatility than
those in the United States. In addition, a Fund may encounter
difficulties or be unable to pursue legal remedies and obtain
judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no
return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could
cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to
settlement problems could result either in losses to a Fund
because of subsequent declines in the value of the portfolio
security or, if a Fund has entered into a contract to sell the
security, in possible liability to the purchaser. Fixed
commissions on some foreign securities exchanges are generally
higher than negotiated commissions on U.S. exchanges, although
IMI will endeavor to achieve the most favorable net results on a
Fund's portfolio transactions. It may be more difficult for a
Fund's agents to keep currently informed about corporate actions
such as stock dividends or other matters that may affect the
prices of portfolio securities. Communications between the
United States and foreign countries may be less reliable than
within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate the risks to
a Fund associated with the foregoing considerations through
investment variation and continuous professional management.
DEPOSITORY RECEIPTS. ADRs, GDRs and similar instruments,
the issuance of which is typically administered by a U.S. or
foreign bank or trust company, evidence ownership of underlying
securities issued by a U.S. or foreign corporation. ADRs are
publicly traded on exchanges or over-the-counter ("OTC") in the
United States. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying
securities. As a result, information concerning the issuer may
not be as current or as readily available as in the case of
sponsored depository instruments, and their prices may be more
volatile than if they were sponsored by the issuers of the
underlying securities.
EMERGING MARKETS. A Fund could have significant investments
in securities traded in emerging markets. Investors should
recognize that investing in such countries involves special
considerations, in addition to those set forth above, that are
not typically associated with investing in United States
securities and that may affect a Fund's performance favorably or
unfavorably.
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility;
(iii) certain national policies that may restrict a Fund's
investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until
relatively recently in certain Eastern European countries, of a
capital market structure or market-oriented economy; (vii) the
possibility that recent favorable economic developments in
Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of a Fund's investments. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, a Fund could
lose a substantial portion of any investments it has made in the
affected countries. Further, few (if any) accounting standards
exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial in relation to
the actual market values and may be adverse to a Fund's net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of a Fund's assets invested in such
country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to
the custody of a Fund's cash and securities, that Fund's
investment in such countries may be limited or may be required to
be effected through intermediaries. The risk of loss through
governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES. Investment in foreign securities
usually will involve currencies of foreign countries. A Fund may
also temporarily hold funds in bank deposits in foreign
currencies during the completion of investment programs and may
purchase forward foreign currency contracts. Because of these
factors, the value of the assets of a Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions
between various currencies. Although the Funds' Custodian values
each Fund's assets daily in terms of U.S. dollars, the Funds
generally do not convert their holdings of foreign currencies
into U.S. dollars on a daily basis. A Fund will do so from time
to time, however, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. A Fund will conduct its
foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to
purchase or sell foreign currencies.
Because a Fund normally will be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in U.S. markets. A Fund's
share price will reflect the movements of both the different
stock and bond markets in which it is invested (both U.S. and
foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar
against foreign currencies may account for part of a Fund's
investment performance. U.S. and foreign securities markets do
not always move in step with each other, and the total returns
from different markets may vary significantly. In addition,
significant uncertainty surrounds the proposed introduction of
the euro (a common currency for the European Union) in January
1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which
the Funds' assets are denominated may be devalued against the
U.S. dollar, resulting in a loss to the Funds.
ILLIQUID SECURITIES
A Fund may purchase securities other than in the open
market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities" or "not readily marketable"(i.e., they cannot be sold
to the public without registration under the Securities Act of
1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they
are subject to other legal or contractual delays in or
restrictions on resale). This investment practice, therefore,
could have the effect of increasing the level of illiquidity of a
Fund. It is a Fund's policy that illiquid securities (including
repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's
Board of Trustees has approved guidelines for use by IMI in
determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i)
only to qualified institutional buyers; (ii) in a privately
negotiated transaction to a limited number of purchasers; (iii)
in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for
which a registration statement is in effect under the 1933 Act.
Issuers of restricted securities may not be subject to the
disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded. If
adverse market conditions were to develop during the period
between a Fund's decision to sell a restricted or illiquid
security and the point at which the Fund is permitted or able to
sell such security, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted
securities, a Fund may be required to bear all or part of the
registration expenses. A Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, in such event, the Fund
may be liable to purchasers of such securities if the
registration statement prepared by the issuer is materially
inaccurate or misleading.
Since it is not possible to predict with assurance that the
market for securities eligible for resale under Rule 144A will
continue to be liquid, IMI will monitor such restricted
securities subject to the supervision of the Board of Trustees.
Among the factors IMI may consider in reaching liquidity
decisions relating to Rule 144A securities are: (1) the
frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security
and the nature of the market for the security (i.e., the time
needed to dispose of the security, the method of soliciting
offers, and the mechanics of the transfer).
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests
in real estate mortgages or equities for the benefit of its
investors. REITs are dependent upon management skill, may not be
diversified and are subject to the risks of financing projects.
Such entities are also subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended (the "Code"), and to
maintain exemption from the 1940 Act. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his
or her proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys
a money market instrument and obtains a simultaneous commitment
from the seller to repurchase the instrument at a specified time
and at an agreed-upon yield. Under guidelines approved by the
Board, a Fund is permitted to enter into repurchase agreements
only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other
securities that IMI has approved for use as collateral for
repurchase agreements and the collateral must be marked-to-market
daily. A Fund will enter into repurchase agreements only with
banks and broker-dealers deemed to be creditworthy by its Adviser
under the above-referenced guidelines. In the unlikely event of
failure of the executing bank or broker-dealer, a Fund could
experience some delay in obtaining direct ownership of the
underlying collateral and might incur a loss if the value of the
security should decline, as well as costs in disposing of the
security.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of small or new companies may be subject to more
abrupt or erratic market movements because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
WARRANTS
The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in a tandem with the prices of
the underlying securities, and are, therefore, considered
speculative investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a warrant held by
a Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. A Fund may engage in transactions in options on
securities and stock indices in accordance with its stated
investment objective and policies. A Fund may also purchase put
options on securities and may purchase and sell (write) put and
call options on stock indices. Options on securities and stock
indices purchased or written by a Fund will be limited to options
traded on national securities exchanges, boards of trade or
similar entities, or in the OTC markets.
A call option is a short-term contract (having a duration of
less than one year) pursuant to which the purchaser, in return
for a premium paid, has the right to buy the security underlying
the option at a specified exercise price at any time during the
term of the option. The writer of the call option, who receives
the premium, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise
price. A put option is a similar contract pursuant to which the
purchaser, in return for a premium paid, has the right to sell
the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the put
option, who receives the premium, has the obligation, upon
exercise of the option, to buy the underlying security at the
exercise price. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the
underlying security, the time remaining to expiration of the
option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the
Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the
exercise of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing
sale transaction can be effected at any particular time or at any
acceptable price. If any call or put option is not exercised or
sold, it will become worthless on its expiration date.
A Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by
the Fund if the premium, plus commission costs, paid by the Fund
to purchase the call or the put is less (or greater) than the
premium, less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if a call
or a put that a Fund has written lapses unexercised, because the
Fund would retain the premium. Any such gains (or losses) are
considered short-term capital gains (or losses) for Federal
income tax purposes. Net short-term capital gains, when
distributed by a Fund, are taxable as ordinary income. See
"Taxation."
A Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put previously purchased
by the Fund if the premium, less commission costs, received by
the Fund on the sale of the call or the put is greater (or less)
than the premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date, and
a Fund will realize a loss in the amount of the premium paid,
plus commission costs. Any such gain or loss will be long-term
or short-term gain or loss, depending upon a Fund's holding
period for the option.
Exchange-traded options generally have standardized terms
and are issued by a regulated clearing organization (such as the
Options Clearing Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by a Fund and
its counterparty (usually a securities dealer or a financial
institution) with no clearing organization guarantee. When a
Fund purchases an OTC option, it relies on the party from whom it
has purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty fails
to do so, a Fund will lose any premium paid for the option, as
well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to
determine the likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may write
(sell) covered call options on the Fund's securities in an
attempt to realize a greater current return than would be
realized on the securities alone. A Fund may also write covered
call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the
options). In view of the investment objectives of a Fund, the
Fund generally would write call options only in circumstances
where the investment adviser to the Fund does not anticipate
significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A Fund may write covered call options as described in the
Funds' Prospectus. A "covered" call option means generally that
so long as the Fund is obligated as the writer of a call option,
the Fund will (i) own the underlying securities subject to the
option, or (ii) have the right to acquire the underlying
securities through immediate conversion or exchange of
convertible preferred stocks or convertible debt securities owned
by the Fund. Although a Fund receives premium income from these
activities, any appreciation realized on an underlying security
will be limited by the terms of the call option. A Fund may
purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, a Fund receives a premium
for undertaking the obligation to sell the underlying security at
a fixed price during the option period, if the option is
exercised. So long as a Fund remains obligated as a writer of a
call option, it forgoes the opportunity to profit from increases
in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents
such a profit (and retains the risk of loss should the value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may
purchase a put option on an underlying security owned by the Fund
as a defensive technique in order to protect against an
anticipated decline in the value of the security. A Fund, as the
holder of the put option, may sell the underlying security at the
exercise price regardless of any decline in its market price. In
order for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise
price to cover the premium and transaction costs that a Fund must
pay. These costs will reduce any profit a Fund might have
realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce
any capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by a Fund for leveraging purposes.
A Fund may also purchase a put option on an underlying
security that it owns and at the same time write a call option on
the same security with the same exercise price and expiration
date. Depending on whether the underlying security appreciates
or depreciates in value, a Fund would sell the underlying
security for the exercise price either upon exercise of the call
option written by it or by exercising the put option held by it.
A Fund would enter into such transactions in order to profit from
the difference between the premium received by the Fund for the
writing of the call option and the premium paid by the Fund for
the purchase of the put option, thereby increasing the Fund's
current return. A Fund may write (sell) put options on
individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. A
Fund may purchase and sell (write) put and call options on
securities indices. An index assigns relative values to the
securities included in the index and the index fluctuates with
changes in the market values of the securities so included.
Options on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a specified
price, they give the purchaser the right to receive cash. The
amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiple (the
"multiplier"). The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function
similar to the unit of trading for a stock option. It determines
the total dollar value per contract of each point in the
difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on
different indices have different multipliers.
When a Fund writes a call or put option on a stock index,
the option is "covered", in the case of a call, or "secured", in
the case of a put, if the Fund maintains in a segregated account
with the Custodian cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain special risks. During the option
period, the covered call writer, in return for the premium on the
option, has given up the opportunity to profit from a price
increase in the underlying securities above the exercise price,
but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must
deliver the underlying securities (or cash in the case of an
index option) at the exercise price. If a put or call option
purchased by a Fund is not sold when it has remaining value, and
if the market price of the underlying security (or index), in the
case of a put, remains equal to or greater than the exercise
price or, in the case of a call, remains less than or equal to
the exercise price, a Fund will lose its entire investment in the
option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements
in a related security (or securities), the price of the put or
call option may move more or less than the price of the related
security (or securities). In this regard, there are differences
between the securities and options markets that could result in
an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. Furthermore,
if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the
price has risen or fallen more than the maximum amount specified
by the exchange. Closing transactions can be made for OTC
options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists.
There is no assurance that a Fund will be able to close out an
OTC option position at a favorable price prior to its expiration.
In the event of insolvency of the counterparty, a Fund might be
unable to close out an OTC option position at any time prior to
its expiration. Although a Fund may be able to offset to some
extent any adverse effects of being unable to liquidate an option
position, the Fund may experience losses in some cases as a
result of such inability.
A Fund's options activities may impact the level of its
portfolio turnover and brokerage commissions. See "Portfolio
Turnover."
A Fund's success in using options techniques depends, among
other things, on the Advisor's ability to predict accurately the
direction and volatility of price movements in the options and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. A Fund may enter into futures contracts and
options on futures contracts for hedging purposes. A futures
contract provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity at a
specified price and time. When a purchase or sale of a futures
contract is made by a Fund, the Fund is required to deposit with
its Custodian (or broker, if legally permitted) in a segregated
account a specified amount of cash or liquid securities ("initial
margin"). The margin required for a futures contract is set by
the exchange on which the contract is traded and may be modified
during the term of the contract. The initial margin is in the
nature of a performance bond or good faith deposit on the futures
contract which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been
satisfied. A futures contract held by a Fund is valued daily at
the official settlement price of the exchange on which it is
traded. Each day a Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures
contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by a Fund
but is instead a settlement between the Fund and the broker of
the amount one would owe the other if the futures contract
expired. In computing daily net asset value, a Fund will mark-
to-market its open futures position.
A Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts it has
written. Such margin deposits will vary depending on the nature
of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and
other futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, generally these
obligations are closed out prior to delivery of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
When purchasing a futures contract, a Fund will maintain in
a segregated account with its Custodian (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with a futures commission merchant ("FCM") as
margin, are equal to the market value of the futures contract.
Alternatively, a Fund may "cover" its position by purchasing a
put option on the same futures contract with a strike price as
high as or higher than the price of the contract held by the
Fund.
When selling a futures contact, a Fund will maintain with
its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by that Fund (or at a higher price if the
difference is maintained in cash or liquid assets in a segregated
account with the Fund's Custodian).
When selling a call option on a futures contract, a Fund
will maintain with its Custodian in a segregated account (and
mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with an FCM as margin, equal
the total market value of the futures contract underlying the
call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by
owning the instruments underlying the futures contract, or by
holding a separate call option permitting the Fund to purchase
the same futures contract at a price not higher than the strike
price of the call option sold by that Fund.
When selling a put option on a futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that equal the
purchase price of the futures contract less any margin on
deposit. Alternatively, a Fund may cover the position either by
entering into a short position in the same futures contract, or
by owning a separate put option permitting it to sell the same
futures contract so long as the strike price of the purchased put
option is the same or higher than the strike price of the put
option sold by the Fund.
INTEREST RATE FUTURES CONTRACTS. A Fund may engage in
interest rate futures contracts transactions for hedging purposes
only. An interest rate futures contract is an agreement between
parties to buy or sell a specified debt security at a set price
on a future date. The financial instruments that underlie
interest rate futures contracts include long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA certificates, and three-month
U.S. Treasury bills. In the case of futures contracts traded on
U.S. exchanges, the exchange itself or an affiliated clearing
corporation assumes the opposite side of each transaction (i.e.,
as buyer or seller). A futures contract may be satisfied or
closed out by delivery or purchase, as the case may be in the
cash financial instrument or by payment of the change in the cash
value of the index. Frequently, using futures to effect a
particular strategy instead of using the underlying or related
security will result in lower transaction costs being incurred.
A Fund may sell interest rate futures contracts in order to
hedge its portfolio securities whose value may be sensitive to
changes in interest rates. In addition, a Fund could purchase
and sell these futures contracts in order to hedge its holdings
in certain common stocks (such as utilities, banks and savings
and loans) whose value may be sensitive to changes in interest
rates. A Fund could sell interest rate futures contracts in
anticipation of or during a market decline to attempt to offset
the decrease in market value of its securities that might
otherwise result. When a Fund is not fully invested in
securities, it could purchase interest rate futures in order to
gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that it intends to purchase.
As such purchases are made, an equivalent amount of interest rate
futures contracts will be terminated by offsetting sales. In a
substantial majority of these transactions, a Fund would purchase
such securities upon termination of the futures position whether
the futures position results from the purchase of an interest
rate futures contract or the purchase of a call option on an
interest rate futures contract, but under unusual market
conditions, a futures position may be terminated without the
corresponding purchase of securities.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. Options on
interest rate futures give the purchaser the right (but not the
obligation), in return for the premium paid, to assume a position
in an interest rate futures contract at a specified exercise
price at a time during the period of the option.
Transactions in options on interest rate futures enable a
Fund to hedge against the possibility that fluctuations in
interest rates and other factors may result in a general decline
in prices of debt securities owned by the Fund. Assuming that
any decline in the securities being hedged is accomplished by a
rise in interest rates, the purchase of put options and sale of
call options on the futures contracts may generate gains which
can partially offset any decline in the value of the Fund's
portfolio securities which have been hedged. However, if after
the Fund purchases or sells an option on a futures contract the
value of the securities being hedged moves in the opposite
direction from that contemplated, the Fund may experience losses
in the form of premiums on such options which would partially
offset gains the Fund would have.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. A
Fund may engage in foreign currency futures contracts and related
options transactions for hedging purposes. A foreign currency
futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a foreign
currency at a specified price and time.
An option on a foreign currency futures contract gives the
holder the right, in return for the premium paid, to assume a
long position (call) or short position (put) in a futures
contract at a specified exercise price at any time during the
period of the option. Upon the exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true.
A Fund may purchase call and put options on foreign
currencies as a hedge against changes in the value of the U.S.
dollar (or another currency) in relation to a foreign currency in
which portfolio securities of the Fund may be denominated. A
call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of
foreign currency at a specified price during a fixed period of
time. The Fund may invest in options on foreign currency which
are either listed on a domestic securities exchange or traded on
a recognized foreign exchange.
In those situations where foreign currency options may not
be readily purchased (or where such options may be deemed
illiquid) in the currency in which the hedge is desired, the
hedge may be obtained by purchasing an option on a "surrogate"
currency (i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies).
A surrogate currency's exchange rate movements parallel that of
the primary currency. Surrogate currencies are used to hedge an
illiquid currency risk, when no liquid hedge instruments exist in
world currency markets for the primary currency.
A Fund will only enter into currency futures contracts and
futures options which are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity or quoted on
an automated quotation system. A Fund will not enter into a
futures contract or purchase an option thereon if, immediately
thereafter, the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open
futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into. A call
option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A
put option is "in the money" if the exercise price exceeds the
value of the futures contract that is the subject of the option.
For additional information about margin deposits required with
respect to futures contracts and options thereon, see "Futures
Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. A
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can
be no guarantee that there will be a correlation between price
movements in the hedging vehicle and in a Fund's portfolio
securities being hedged. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as
variations in speculative market demand for futures and futures
options on securities, including technical influences in futures
trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying
the standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or a futures
option position, and the Fund would remain obligated to meet
margin requirements until the position is closed. In addition,
there can be no assurance that an active secondary market will
continue to exist.
Currency futures contracts and options thereon may be traded
on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the United States; may not
involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such position
also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
SECURITIES INDEX FUTURES CONTRACTS
A Fund may enter into securities index futures contracts as
an efficient means of regulating the Fund's exposure to the
equity markets. A Fund will not engage in transactions in
futures contracts for speculation but only as a hedge against
changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which it intends to
purchase. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed
upon when the contract is made. Entering into a contract to buy
units of an index is commonly referred to as purchasing a
contract or holding a long position in the index. Entering into
a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. The value of a
unit is the current value of the stock index. For example, the
S&P 500 Index is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange (the "Exchange").
The S&P 500 Index assigns relative weightings to the 500 common
stocks included in the Index, and the Index fluctuates with
changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150).
The index futures contract specifies that no delivery of the
actual securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the
expiration of the contract. For example, if a Fund enters into a
futures contract to buy 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, a Fund will gain $2,000
(500 units x gain of $4). If a Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A Fund's success in
using hedging techniques depends, among other things, on IMI's
ability to predict correctly the direction and volatility of
price movements in the futures and options markets as well as in
the securities markets and to select the proper type, time and
duration of hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
A Fund's ability to hedge effectively all or a portion of
its securities through transactions in index futures (and
therefore the extent of its gain or loss on such transactions)
depends on the degree to which price movements in the underlying
index correlate with price movements in the Fund's securities.
Insofar as such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, a Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount as the
hedging instrument. This risk will increase as the composition
of a Fund's portfolio diverges from the composition of the
hedging instrument.
Although a Fund intends to establish positions in these
instruments only when there appears to be an active market, there
is no assurance that a liquid market will exist at a time when
the Fund seeks to close a particular option or futures position.
Trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers. In addition, the futures exchanges may suspend trading
after the price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, a Fund may experience
losses as a result of its inability to close out a position, and
it may have to liquidate other investments to meet its cash
needs.
Although some index futures contracts call for making or
taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
A Fund will only enter into index futures contracts or
futures options that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. A Fund will use futures
contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of
the CFTC.
When purchasing an index futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by a Fund.
When selling an index futures contract, a Fund will maintain
with its Custodian in a segregated account (and mark-to-market on
a daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting a Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if the
difference is maintained in cash or liquid assets in a segregated
account with the Fund's Custodian).
COMBINED TRANSACTIONS
A Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and some
combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in
the opinion of IMI, it is in the best interests of a Fund to do
so. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although
combined transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the management
objective.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set forth in the
Prospectus under "Investment Objectives and Policies," and the
investment restrictions set forth below are fundamental policies
of the Fund and may not be changed with respect to that Fund
without the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of that Fund. Under these
restrictions, each of Ivy US Emerging Growth Fund, Ivy Growth
Fund and Ivy Growth with Income Fund may not:
(i) purchase or sell real estate or commodities and
commodity contracts;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) participate in an underwriting or selling group in
connection with the public distribution of
securities except for its own capital stock;
(v) purchase from or sell to any of its officers or
trustees, or firms of which any of them are
members or which they control, any securities
(other than capital stock of the Fund), but such
persons or firms may act as brokers for the Fund
for customary commissions to the extent permitted
by the Investment Company Act of 1940;
(vi) make an investment in securities of companies in
any one industry (except obligations of domestic
banks or the U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment;
(vii) issue senior securities, except as appropriate to
evidence indebtedness which it is permitted to
incur, and except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities; provided that
collateral arrangements with respect to currency-
related contracts, futures contracts, options or
other permitted investments, including deposits of
initial and variation margin, are not considered
to be the issuance of senior securities for
purposes of this restriction;
(viii) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreement or (b) the purchase of
publicly distributed bonds, debentures and other
securities of a similar type, or privately placed
municipal or corporate bonds, debentures and other
securities of a type customarily purchased by
institutional investors or publicly traded in the
securities markets;
(ix) borrow money, except for temporary purposes where
investment transactions might advantageously
require it. Any such loan may not be for a period
in excess of 60 days, and the aggregate amount of
all outstanding loans may not at any time exceed
10% of the value of the total assets of the Fund
at the time any such loan is made.
Under the 1940 Act, a Fund is permitted, subject to each
Fund's investment restrictions, to borrow money only from banks.
The Trust has no current intention of borrowing amounts in excess
of 5% of each the Fund's assets. Each of Ivy US Emerging Growth
Fund, Ivy Growth Fund and Ivy Growth with Income Fund will
continue to interpret fundamental investment restriction (i)
above to prohibit investment in real estate limited partnership
interests; this restriction shall not, however, prohibit
investment in readily marketable securities of companies that
invest in real estate or interests therein, including REITs.
Further, as a matter of fundamental policy, each of Ivy Growth
Fund and Ivy Growth with Income Fund may not:
(i) invest more than 5% of the value of its total
assets in the securities of any one issuer (except
obligations of domestic banks or the U.S.
Government, its agencies, authorities and
instrumentalities);
(ii) purchase the securities of any other open-end
investment company, except as part of a plan of
merger or consolidation; or
(iii) hold more than 10% of the voting securities of any
one issuer (except obligations of domestic banks
or the U.S. Government, its agencies, authorities
and instrumentalities).
Further, as a matter of fundamental policy, each of Ivy Bond
Fund and Ivy US Emerging Growth Fund may not:
(i) purchase securities of any one issuer (except U.S.
Government securities) if as a result more than 5%
of the Fund's total assets would be invested in
such issuer or the Fund would own or hold more
than 10% of the outstanding voting securities of
that issuer; provided, however, that up to 25% of
the value of the Fund's total assets may be
invested without regard to these limitations.
Further, as a matter of fundamental policy, Ivy Bond Fund may
not:
(i) Make investments in securities for the purpose of
exercising control over or management of the
issuer;
(ii) Borrow amounts in excess of 10% of its total
assets, taken at the lower of cost or market
value, and then only from banks as a temporary
measure for extraordinary or emergency purposes.
(iii) Purchase the securities of issuers conducting
their principal business activities in the same
industry if immediately after such purchase the
value of the Fund's investments in such industry
would exceed 25% of the value of the total assets
of the Fund;
(iv) Act as an underwriter of securities;
(v) Issue senior securities, except insofar as the
Fund may be deemed to have issued a senior
security in connection with any repurchase
agreement or any permitted borrowing.
(vi) Invest in real estate, real estate mortgage loans,
commodities, commodity futures contracts or
interests in oil, gas and/or mineral exploration
or development programs, although a Fund may
purchase and sell (a) securities which are secured
by real estate, (b) securities of issuers which
invest or deal in real estate, and (c) futures
contracts as described in a Fund's Prospectus;
(vii) Participate on a joint or a joint and several
basis in any trading account in securities. The
"bunching" of orders of the Fund--or of the Fund
and of other accounts under the investment
management of the persons rendering investment
advice to the Fund--for the sale or purchase of
portfolio securities shall not be considered
participation in a joint securities trading
account;
(viii) Purchase securities on margin, except such short-
term credits as are necessary for the clearance of
transactions. The deposit or payment by a Fund of
initial or variation margin in connection with
futures contracts or related options transactions
is not considered the purchase of a security on
margin;
(ix) Make loans, except that this restriction shall not
prohibit (a) the purchase and holding of a portion
of an issue of publicly distributed debt
securities, (b) the lending of portfolio
securities (provided that the loan is secured
continuously by collateral consisting of U.S.
Government securities or cash or cash equivalents
maintained on daily marked-to-market basis in an
amount at least equal to the current market value
of the securities loaned), or (c) entry into
repurchase agreements with banks or broker-
dealers;
(x) Mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any
securities owned or held by the Fund (except as
may be necessary in connection with permitted
borrowings and then not in excess of 20% of the
Fund's total assets); provided, however, this does
not prohibit escrow, collateral or margin
arrangements in connection with its use of
options, short sales, futures contracts and
options on future contracts; or
(xi) Make short sales of securities or maintain a short
position.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund has adopted the
following additional restrictions, which are not fundamental and
which may be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory policy.
Under these restrictions, each Fund may not:
(i) purchase any security if, as a result, the Fund
would then have more than 5% of its total assets
(taken at current value) invested in securities of
companies (including predecessors) less than three
years old.
Further, as a matter of non-fundamental policy, each of Ivy US
Emerging Growth Fund, Ivy Growth Fund and Ivy Growth with Income
Fund may not:
(i) invest in oil, gas or other mineral leases or
exploration or development programs;
(ii) engage in the purchase and sale of puts, calls,
straddles or spreads (except to the extent
described in the Prospectus and in this SAI);
(iii) invest in companies for the purpose of exercising
control of management; or
(iv) invest more than 5% of its total assets in
warrants, valued at the lower of cost or market,
or more than 2% of its total assets in warrants,
so valued, which are not listed on either the New
York or American Stock Exchanges.
Further, as a matter of non-fundamental policy, each of Ivy
Bond Fund, Ivy US Emerging Growth Fund and Ivy Growth with Income
Fund may not:
(i) purchase or retain securities of any company if
officers and Trustees of the Trust and officers
and directors of Ivy Management, Inc. (the
Manager, with respect to Ivy Bond Fund), MIMI or
Mackenzie Financial Corporation who individually
own more than 1/2 of 1% of the securities of that
company together own beneficially more than 5% of
such securities.
Further, as a matter of non-fundamental policy, each of Ivy
Growth Fund and Ivy Growth with Income Fund may not:
(i) invest more than 5% of the value of its total
assets in the securities of issuers which are not
readily marketable.
Further, as a matter of non-fundamental policy, each of Ivy
Bond Fund and Ivy US Emerging Growth Fund may not:
(i) invest more than 15% of its net assets taken at
market value at the time of investment in
"illiquid securities." Illiquid securities may
include securities subject to legal or contractual
restrictions on resale (including private
placements), repurchase agreements maturing in
more than seven days, certain options traded over
the counter that the Fund has purchased,
securities being used to cover certain options
that a fund has written, securities for which
market quotations are not readily available, or
other securities which legally or in IMI's
opinion, subject to the Board's supervision, may
be deemed illiquid, but shall not include any
instrument that, due to the existence of a trading
market, to the Fund's compliance with certain
conditions intended to provide liquidity, or to
other factors, is liquid.
Further, as a matter of non-fundamental policy, Ivy US Emerging
Growth Fund may not:
(i) purchase securities of other investment companies,
except in connection with a merger, consolidation
or sale of assets, and except that it may purchase
shares of other investment companies subject to
such restrictions as may be imposed by the 1940
Act and rules thereunder or by any state in which
its shares are registered.
Further, as a matter of non-fundamental policy, Ivy Bond Fund may
not:
(i) purchase or sell real estate limited partnership
interests; or
(ii) purchase or sell interests in oil, gas or mineral
leases (other than securities of companies that
invest in or sponsor such programs).
Whenever an investment objective, policy or restriction set
forth in the Prospectus or this SAI states a maximum percentage
of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in the percentage
which results from circumstances not involving any affirmative
action by a Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
that Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers, and (except as noted below) bears the cost
of providing, to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds, other than the Funds, whose shares are also distributed
by Ivy Mackenzie Distributors, Inc. ("IMDI"). These funds are:
Ivy Canada Fund, Ivy China Region Fund, Ivy Global Fund, Ivy
International Fund, Ivy South America Fund, Ivy Developing
Nations Fund, Ivy High Yield Fund, Ivy Global Science &
Technology Fund, Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund, Ivy International Small Companies Fund, Ivy
International Fund II, Ivy Pan-Europe Fund and Ivy Money Market
Fund (the other fourteen series of the Trust). Shareholders
should obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $50 per
month, (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund
have an exchange privilege with certain other Ivy funds (except
Ivy International Fund unless they have an existing Ivy
International Fund account). Before effecting an exchange,
shareholders of each Fund should obtain and read the currently
effective prospectus for the Ivy fund into which the exchange is
to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy fund ("new Class A Shares") on the
basis of the relative net asset value per Class A share, plus an
amount equal to the difference, if any, between the sales charge
previously paid on the outstanding Class A shares and the sales
charge payable at the time of the exchange on the new Class A
shares. (The additional sales charge will be waived for Class A
shares that have been invested for a period of 12 months or
longer.) Class A shareholders may also exchange their shares for
shares of Ivy Money Market Fund (no initial sales charge will be
assessed at the time of such an exchange).
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A: Class A
shareholders may exchange their Class A shares that are subject
to a contingent deferred sales charge ("CDSC"), as described in
the Prospectus ("outstanding Class A shares"), for Class A shares
of another Ivy fund ("new Class A shares") on the basis of the
relative net asset value per Class A share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class A shares. Class A shareholders of a Fund
exercising the exchange privilege will continue to be subject to
that Fund's CDSC period following an exchange if such period is
longer than the CDSC period, if any, applicable to the new
Class A shares.
For purposes of computing the CDSC that may be payable upon
the redemption of the new Class A shares, the holding period of
the outstanding Class A shares is "tacked" onto the holding
period of the new Class A shares.
CLASS B: Class B shareholders may exchange their Class B
shares ("outstanding Class B shares") for Class B shares of
another Ivy fund ("new Class B shares") on the basis of the
relative net asset value per Class B share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class B shares. Class B shareholders of a Fund
exercising the exchange privilege will continue to be subject to
that Fund's CDSC schedule (or period) following an exchange if
such schedule is higher (or such period is longer) than the CDSC
schedule (or period) applicable to the new Class B shares.
Class B shares of a Fund acquired through an exchange of
Class B shares of another Ivy fund will be subject to that Fund's
CDSC schedule (or period) if such schedule is higher (or such
period is longer) than the CDSC schedule (or period) applicable
to the Ivy fund from which the exchange was made.
For purposes of both the conversion feature and computing
the CDSC that may be payable upon the redemption of the new
Class B shares (prior to conversion), the holding period of the
outstanding Class B shares is "tacked" onto the holding period of
the new Class B shares.
The following CDSC table applies to Class B shares of Ivy
Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy US Emerging Growth Fund, Ivy Global Fund, Ivy
Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy High
Yield Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy South America Fund,
Ivy Developing Nations Fund and Ivy Pan-Europe Fund:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C
shares ("outstanding Class C shares") for Class C shares of
another Ivy fund ("new Class C shares") on the basis of the
relative net asset value per Class C share, without the payment
of any CDSC that would otherwise be due upon redemption. (Class
C shares are subject to a CDSC of 1% if redeemed within one year
of the date of purchase.)
CLASS I: Subject to the restrictions set forth in the
following paragraph, Class I shareholders of Ivy Bond Fund may
exchange their outstanding Class I shares for Class I shares of
another Ivy fund on the basis of the relative net asset value per
Class I share.
ALL CLASSES: The minimum value of shares which may be
exchanged into an Ivy fund in which shares are not already held
is $1,000 ($5,000,000 in the case of Class I shares of Ivy Bond
Fund). No exchange out of a Fund (other than by a complete
exchange of all Fund shares) may be made if it would reduce the
shareholder's interest in the Fund to less than $1,000 ($250,000
in the case of Class I shares of Ivy Bond Fund).
Each exchange will be made on the basis of the relative net
asset values per share of each fund of Ivy Fund next computed
following receipt by IMSC of telephone instructions by IMSC or a
properly executed request. Exchanges, whether written or
telephonic, must be received by IMSC by the close of regular
trading on the New York Stock Exchange, Inc. (the "Exchange")
(normally 4:00 p.m., eastern time) to receive the price computed
on the day of receipt. Exchange requests received after that
time will receive the price next determined following receipt of
the request. The exchange privilege may be modified or
terminated at any time, upon at least 60 days' notice to the
extent required by applicable law. See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments in
Class A shares of each Fund made pursuant to a non-binding Letter
of Intent. A Letter of Intent may be submitted by an individual,
his or her spouse and children under the age of 21, or a trustee
or other fiduciary of a single trust estate or single fiduciary
account. See the Account Application in the Prospectus. Any
investor may submit a Letter of Intent stating that he or she
will invest, over a period of 13 months, at least $50,000
($100,000 for Ivy Bond Fund) in Class A shares of a Fund. A
Letter of Intent may be submitted at the time of an initial
purchase of Class A shares of a Fund or within 90 days of the
initial purchase, in which case the Letter of Intent will be back
dated. A shareholder may include, as an accumulation credit, the
value (at the applicable offering price) of all Class A shares of
Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Canada Fund,
Ivy South America Fund, Ivy International Fund, Ivy International
Fund II, Ivy Pan-Europe Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy US Emerging Growth Fund,
Ivy High Yield Fund, Ivy International Small Companies Fund, Ivy
Developing Nations Fund and Ivy Bond Fund (and shares that have
been exchanged into Ivy Money Market Fund from any of the other
funds in the Ivy funds) held of record by him or her as of the
date of his or her Letter of Intent. During the term of the
Letter of Intent, the Transfer Agent will hold Class A shares
representing 5% of the indicated amount (less any accumulation
credit value) in escrow. The escrowed Class A shares will be
released when the full indicated amount has been purchased. If
the full indicated amount is not purchased during the term of the
Letter of Intent, the investor is required to pay IMDI an amount
equal to the difference between the dollar amount of sales charge
that he or she has paid and that which he or she would have paid
on his or her aggregate purchases if the total of such purchases
had been made at a single time. Such payment will be made by an
automatic liquidation of Class A shares in the escrow account. A
Letter of Intent does not obligate the investor to buy or the
Trust to sell the indicated amount of Class A shares, and the
investor should read carefully all the provisions of such letter
before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the funds in the Ivy funds in
accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent
purchase payments in connection with tax-deferred retirement
plans must be at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several funds of the Ivy funds, the annual maintenance fee
will be limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the Trust may be
used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in an Ivy fund if
that fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant,
whether the individual's contribution to an IRA is fully
deductible, partially deductible or not deductible depends on
(i) adjusted gross income and (ii) whether it is the individual
or the individual's spouse who is an active participant, in the
case of married individuals filing jointly. Contributions may be
made up to the maximum permissible amount even if they are not
deductible. Rollover contributions are not includible in income
for Federal income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, amounts withdrawn
and used to pay for deductible medical expenses and amounts
withdrawn by certain unemployed individuals not in excess of
amounts paid for certain health insurance premiums, amounts used
to pay certain qualified higher education expenses, and amounts
used within 120 days of the date the distribution is received to
pay for certain first-time homebuyer expenses. Distributions
must begin to be withdrawn not later than April 1 of the calendar
year following the calendar year in which the individual reaches
age 70-1/2. Failure to take certain minimum required distribu-
tions will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year
(other than 1997, 1998 or 1999) from an IRA (or from an IRA and
other retirement plans) may also result in a penalty tax.
ROTH IRAS: Shares of the Trust also may be used as a
funding medium for a Roth Individual Retirement Account ("Roth
IRA"). A Roth IRA is similar in numerous ways to the regular
(traditional) IRA, described above. Some of the primary
differences are as follows.
A single individual earning below $95,000 can contribute up
to $2,000 per year to a Roth IRA. The maximum contribution
amount diminishes and gradually falls to zero for single filers
with adjusted gross incomes ranging from $95,000 to $110,000.
Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA).
The maximum contribution amount for married couples filing
jointly phases out from $150,000 to $160,000. An individual
whose adjusted gross income exceeds the maximum phase-out amount
cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional
IRA and a Roth IRA as long as the total contribution to all IRAs
does not exceed $2,000. Contributions to a Roth IRA are not
deductible. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained
age 70 1/2.
No distributions are required to be taken prior to the death
of the original account holder. If a Roth IRA has been
established for a minimum of five years, distributions can be
taken tax-free after reaching age 59 1/2, for a first-time home
purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical
expenses, the purchase of health insurance for an unemployed
individual and education expenses.
An individual with an income of less than $100,000 (who is
not married filing separately) can roll his or her existing IRA
into a Roth IRA. However, the individual must pay taxes on the
taxable amount in his or her traditional IRA. Individuals who
complete the rollover in 1998 will be allowed to spread the tax
payments over a four-year period. After 1998, all taxes on such
a rollover will have to be paid in the tax year in which the
rollover is made.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more of the funds in the Ivy
funds through a qualified retirement plan, a Custodial Agreement
and a Retirement Plan are available from IMSC. The Retirement
Plan may be adopted as a profit sharing plan or a money purchase
pension plan. A profit sharing plan permits an annual
contribution to be made in an amount determined each year by the
self-employed individual within certain limits prescribed by law.
A money purchase pension plan requires annual contributions at
the level specified in the Custodial Agreement. There is no set-
up fee for qualified plans and the annual maintenance fee is
$20.00 per account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code") permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of a Fund may
reinvest all or a part of the proceeds of the redemption back
into Class A shares of the Fund at net asset value (without a
sales charge) within 60 days from the date of redemption. This
privilege may be exercised only once. The reinvestment will be
made at the net asset value next determined after receipt by IMSC
of the reinvestment order accompanied by the funds to be
reinvested. No compensation will be paid to any sales personnel
or dealer in connection with the transaction.
Any redemption is a taxable event. A loss realized on a
redemption generally may be disallowed for tax purposes if the
reinvestment privilege is exercised within 30 days after the
redemption. In certain circumstances, shareholders will be
ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment
of $50,000 ($100,000 for Ivy Bond Fund) or more in Class A shares
of a Fund. See "Initial Sales Charge Alternative -- Class A
Shares" in the Prospectus. The reduced sales charge is
applicable to investments made at one time by an individual, his
or her spouse and children under the age of 21, or a trustee or
other fiduciary of a single trust estate or single fiduciary
account (including a pension, profit sharing or other employee
benefit trust created pursuant to a plan qualified under Section
401 of the Code). Rights of Accumulation is also applicable to
current purchases of all of the funds in the Ivy funds (except
Ivy Money Market Fund) by any of the persons enumerated above,
where the aggregate quantity of Class A shares of Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region
Fund, Ivy US Emerging Growth Fund, Ivy Global Fund, Ivy Global
Natural Resources Fund, Ivy Global Science & Technology Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy International Fund,
Ivy High Yield Fund, Ivy International Small Companies Fund, Ivy
South America Fund, Ivy Developing Nations Fund, Ivy
International Fund II and Ivy Pan-Europe Fund (and shares that
have been exchanged into Ivy Money Market Fund from any of the
other funds in the Ivy funds) and of any other investment company
distributed by IMDI, previously purchased or acquired and
currently owned, determined at the higher of current offering
price or amount invested, plus the Class A shares being
purchased, amounts to $50,000 or more for Ivy Asia Pacific Fund,
Ivy Canada Fund, Ivy China Region Fund, Ivy US Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Fund, Ivy International Small
Companies Fund, Ivy South America Fund, Ivy Developing Nations
Fund, Ivy International Fund II, Ivy Pan-Europe Fund; or $100,000
or more for Ivy Bond Fund or Ivy High Yield Fund.
At the time an investment takes place, IMSC must be notified
by the investor or his or her dealer that the investment
qualifies for the reduced sales charge on the basis of previous
investments. The reduced sales charge is subject to confirmation
of the investor's holdings through a check of the particular
fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (except shareholders with accounts in Class I
of the Class I Funds) may establish a Systematic Withdrawal Plan
(a "Withdrawal Plan"), by telephone instructions or by delivery
to IMSC of a written election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in such shareholder's name,
properly endorsed by the shareholder. To be eligible to elect a
Withdrawal Plan, a shareholder must have at least $5,000 in his
or her account. A Withdrawal Plan may not be established if the
investor is currently participating in the Automatic Investment
Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
Additional investments made by investors participating in a
Withdrawal Plan must equal at least $1,000 each while the
Withdrawal Plan is in effect. Making additional purchases while
a Withdrawal Plan is in effect may be disadvantageous to the
investor because of applicable initial sales charges or CDSCs.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each Fund (except Ivy Bond Fund) may be
purchased in connection with investment programs established by
employee or other groups using systematic payroll deductions or
other systematic payment arrangements. The Trust does not itself
organize, offer or administer any such programs. However, it
may, depending upon the size of the program, waive the minimum
initial and additional investment requirements for purchases by
individuals in conjunction with programs organized and offered by
others. Unless shares of a Fund are purchased in conjunction
with IRAs (see "How to Buy Shares" in the Prospectus), such group
systematic investment programs are not entitled to special tax
benefits under the Code. The Trust reserves the right to refuse
purchases at any time or suspend the offering of shares in
connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check
writing, simplified redemptions and other optional privileges, as
described in the Prospectus, to shareholders using group
systematic investment programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay such fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
Class A shares of a Fund are made available to Merrill Lynch
Daily K Plan (the "Plan") participants at NAV without an initial
sales charge if:
(i) the Plan is recordkept on a daily valuation basis by
Merrill Lynch and, on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has
$3 million or more in assets invested in broker/dealer funds
not advised or managed by Merrill Lynch Asset Management,
L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the fund's principal
underwriter or distributor and in funds advised or managed
by MLAM (collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through
a contract or alliance arrangement with Merrill Lynch, and
on the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as
determined by Merrill Lynch plan conversion manager, on the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement.
Alternatively, Class B shares of a Fund are made available
to Plan participants at NAV without a CDSC if the Plan conforms
with the requirements for eligibility set forth in (i) through
(iii) above but either does not meet the $3 million asset
threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an
independent recordkeeper under a contract with Merrill Lynch that
are currently investing in Class B shares of a Fund convert to
Class A shares once the Plan has reached $5 million invested in
Applicable Investments, or 10 years after the date of the initial
purchase by a participant under the Plan--the Plan will receive a
Plan level share conversion.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI places orders for the purchase and sale of each Fund's
portfolio securities. All portfolio transactions are effected at
the best price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions and therefore,
brokerage commissions are usually not required to be paid by the
particular Fund for such purchases and sales (although the price
paid generally includes undisclosed compensation to the dealer).
The prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from
dealers normally reflect the spread between the bid and asked
prices. In connection with OTC transactions, IMI attempts to
deal directly with the principal market makers, except in those
circumstances where IMI believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions and
evaluates the reasonableness of commissions on the basis of
quality, quantity, and the nature of the firms' professional
services. Commissions to be charged and the rendering of
investment services, including statistical, research, and
counseling services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may be
used by IMI in servicing all of its accounts. In addition, not
all of these services may be used by IMI in connection with the
services it provides to a particular Fund or the Trust. IMI may
consider sales of shares of Ivy funds as a factor in the
selection of broker-dealers and may select broker-dealers who
provide it with research services. IMI will not, however,
execute brokerage transactions other than at the best price and
execution.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Bond Fund paid brokerage commissions of $20,912, $398
and $1,361, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy US Emerging Growth Fund paid brokerage commissions of
$302,892, $426,676 and $583,738, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth Fund paid brokerage commissions of $666,385,
$883,583 and $683,881, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth with Income Fund paid brokerage commissions of
$192,913, $293,827 and $155,283, respectively.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each of these Funds
will accept securities only to increase its holdings in a
portfolio security or to take a new portfolio position in a
security that IMI deems to be a desirable investment for each the
Fund. While no minimum has been established, it is expected that
each the Fund will not accept securities having an aggregate
value of less than $1 million. The Trust may reject in whole or
in part any or all offers to pay for the Fund shares with
securities and may discontinue accepting securities as payment
for the Fund shares at any time without notice. The Trust will
value accepted securities in the manner and at the same time
provided for valuing portfolio securities of each the Fund, and
the Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will
only accept securities delivered in proper form and will not
accept securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 74 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1998).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 74 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1998); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998);Director of The
Mackenzie Funds Inc. (1994-
1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 77 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1998);Director of The
Mackenzie Funds Inc. (1987-
1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 72
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 51 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1998);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-1998).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 63 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 74 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1998).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 41 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1998); Vice President
of Mackenzie Series Trust
(1994-1998); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Trustee
of Mackenzie Series Trust
(1996-1998).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 53 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1998).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 56 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. Employees of IMI
are permitted to make personal securities transactions, subject
to the requirements and restrictions set forth in IMI's Code of
Ethics. The Code of Ethics is designed to identify and address
certain conflicts of interest between personal investment
activities and the interests of investment advisory clients such
as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment
Company Institute's Advisory Group on Personal Investing,
prohibits certain types of transactions absent prior approval,
applies to portfolio managers, traders, research analysts and
others involved in the investment advisory process, and imposes
time periods during which personal transactions may not be made
in certain securities, and requires the submission of duplicate
broker confirmations and monthly reporting of securities
transactions. Exceptions to these and other provisions of the
Code of Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1997)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES[*]
John S. $13,722 N/A N/A $15,000
Anderegg, Jr.
(Trustee)
Paul H. $13,722 N/A N/A $15,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $13,722 N/A N/A $15,000
Channick
(Trustee)
Frank W. $13,722 N/A N/A $15,000
DeFriece, Jr.
(Trustee)
Roy J. $13,722 N/A N/A $15,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $13,722 N/A N/A $15,000
Rosenthal
(Trustee)
Richard N. $13,722 N/A N/A $15,000
Silverman
(Trustee)
J. Brendan $13,722 N/A N/A $15,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] During the year ended December 31, 1997, the fund complex
consisted of the Trust, which had 17 funds at year end, and
Mackenzie Series Trust, an open-end, management investment
company comprised of 4 funds that were reorganized into
series of unaffiliated investment companies on September 5,
1997.
As of April 27, 1998, the Officers and Trustees of the Trust
as a group owned beneficially or of record less than 1% of the
outstanding Class A, Class B, Class C, Class I and Advisor Class
shares of the Funds and of the other fourteen Ivy funds that are
series of the Trust but that are not described in this SAI,
except that the Officers and Trustees of the Trust as a group
owned 2.838% and 2.348%, respectively, of Ivy Asia Pacific Fund
Class A shares and Ivy Global Natural Resources Fund Class A
shares as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to each Fund pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). The Agreement
was approved by the respective sole shareholder of Ivy Bond Fund
on December 31, 1994 and of Ivy US Emerging Growth Fund on April
30, 1993 and by the respective shareholders of Ivy Growth Fund
and Ivy Growth with Income Fund on December 30, 1991. Prior to
the approval by the respective shareholders or sole shareholder
of each Fund, the Agreement was approved on September 29, 1994
with respect to Ivy Bond Fund, on February 19, 1993 with respect
to Ivy US Emerging Growth Fund and October 28, 1991 with respect
to Ivy Growth Fund and Ivy Growth with Income Fund by the Board,
including a majority of the Trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the
distribution plan (see "Distribution Services") or in any related
agreement (the "Independent Trustees").
Until December 31, 1994, MIMI served as the investment
adviser to Ivy Bond Fund, which Fund was a series of Mackenzie
Series Trust until it was reorganized as a series of the Trust on
December 31, 1994. On December 31, 1994, MIMI's interest in the
Agreement with respect to Ivy Bond Fund was assigned by MIMI to
IMI, which is a wholly owned subsidiary of MIMI. The provisions
of the Agreement remain unchanged by IMI's succession to MIMI
thereunder. MIMI, a Delaware corporation, has approximately 10%
of its outstanding common stock listed for trading on the TSE.
MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"),
150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario whose shares are
listed for trading on The TSE. MFC is registered in Ontario as a
mutual fund dealer and advises Ivy Canada Fund and Ivy Global
Natural Resources Fund. IMI currently acts as manager and
investment adviser to the following additional investment
companies registered under the 1940 Act (other than the Funds):
Ivy China Region Fund, Ivy Global Fund, Ivy International Fund,
Ivy South America Fund, Ivy Developing Nations Fund, Ivy High
Yield Fund, Ivy Global Science & Technology Fund, Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy Asia Pacific Fund, Ivy Pan-Europe Fund and Ivy Money Market
Fund.
The Agreement obligates IMI to make investments for the
accounts of each Fund in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Prospectus, the 1940 Act and the provisions of the Code
relating to regulated investment companies, subject to policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by these Funds and places
orders with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain business
management services. IMI is obligated to (1) coordinate with
each Fund's Custodian and monitor the services it provides to
that Fund; (2) coordinate with and monitor any other third
parties furnishing services to each Fund; (3) provide each Fund
with necessary office space, telephones and other communications
facilities as are adequate for the particular Fund's needs;
(4) provide the services of individuals competent to perform
administrative and clerical functions that are not performed by
employees or other agents engaged by the particular Fund or by
IMI acting in some other capacity pursuant to a separate
agreement or arrangements with the Fund; (5) maintain or
supervise the maintenance by third parties of such books and
records of the Trust as may be required by applicable Federal or
state law; (6) authorize and permit IMI's directors, officers and
employees who may be elected or appointed as trustees or officers
of the Trust to serve in such capacities; and (7) take such other
action with respect to the Trust, after approval by the Trust as
may be required by applicable law, including without limitation
the rules and regulations of the SEC and of state securities
commissions and other regulatory agencies.
Ivy Bond Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of
0.75% of the first $100 million of the Fund's average net assets,
reduced to 0.50% of the Fund's average net assets in excess of
$100 million. Ivy US Emerging Growth Fund and Ivy Growth Fund
each pay IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 0.85% of each
Fund's average net assets. Ivy Growth with Income Fund pays IMI
a monthly fee for providing business management and investment
advisory services at an annual rate of 0.75% of the Funds average
net assets.
For fiscal years ended December 31, 1995, 1996 and 1997, Ivy
Bond Fund paid IMI $848,778, $781,647 and $800,555, respectively
(of which IMI reimbursed $2,615, $0 and $0, respectively,
pursuant to required expense limitations).
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy US Emerging Growth Fund paid IMI $318,186, $657,579 and
$973,756, respectively.
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Growth Fund paid IMI $2,278,390, $2,608,378 and $2,794,304,
respectively (of which IMI reimbursed $11,680, $12,486 and $0,
respectively, pursuant to voluntary expense limitations).
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Growth with Income Fund paid IMI $515,787, $629,322 and
$624,013, respectively.
Under the Agreement, the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits Ivy US Emerging Growth Fund's total
operating expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation, class-specific expenses,
indemnification expenses, and extraordinary expenses) to an
annual rate of 1.95% of the Fund's average net assets, which may
lower that Fund's expenses and increase its yield. The Fund's
expense limitation may be terminated or revised at any time, at
which time its expenses may increase and its yield may be
reduced.
On September 13, 1997, the Board (including a majority of
the Independent Trustees) last approved the continuance of the
Agreement with respect to each of Ivy Bond Fund, Ivy US Emerging
Growth Fund, Ivy Growth Fund and Ivy Growth with Income Fund.
Each Agreement will continue in effect with respect to each Fund
from year to year, or for more than the initial period, as the
case may be, only so long as the continuance is specifically
approved at least annually (i) by the vote of a majority of the
Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the particular Fund or (b) by the vote of a majority
of the entire Board. If the question of continuance of the
Agreements (or adoption of any new agreement) is presented to
shareholders, continuance (or adoption) shall be effected only if
approved by the affirmative vote of a majority of the outstanding
voting securities of the particular Fund. See "Capitalization
and Voting Rights."
Each Agreement may be terminated with respect to a
particular Fund at any time, without payment of any penalty, by
the vote of a majority of the Board, or by a vote of a majority
of the outstanding voting securities of that Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to
the Trust. The Agreement shall terminate automatically in the
event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of Ivy Fund's shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on September 13, 1997. IMDI distributes shares of the
Funds through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the
Funds on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement, IMDI is entitled to
deduct a commission on all Class A Fund shares sold equal*** to
the difference, if any, between the public offering price, as set
forth in the Funds' then-current prospectus, and the net asset
value on which such price is based. Out of that commission, IMDI
may reallow to dealers such concession as IMDI may determine from
time to time. In addition, IMDI is entitled to deduct a CDSC on
the redemption of Class A shares sold without an initial sales
charge and Class B and Class C shares, in accordance with, and in
the manner set forth in, the Prospectus.
Under the Distribution Agreement, each Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy Bond Fund
$101,081, $97,905 and $200,364, respectively, in sales
commissions, of which $20,028, $18,170 and $31,911, respectively,
was retained after dealers' reallowances. During the fiscal
years ended December 31, 1995, 1996 and 1997, IMDI received
$9,926, $18,328 and $11,814, respectively, in CDSCs paid upon
certain redemptions of Class B shares of the Fund. During the
period April 30, 1996 (the date on which Class C shares were
first offered for sale to the public) to December 31, 1996, IMDI
received $0 and $188, respectively, in CDSCs paid upon certain
redemptions of Class C shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy US
Emerging Growth Fund $268,012, $488,492 and $350,718,
respectively, in sales commissions, of which $41,326, $69,833 and
$46,741, respectively, was retained after dealers' reallowances.
During the fiscal years ended December 31, 1995, 1996 and 1997,
IMDI received $31,687, $34,776 and $123,426, respectively, in
CDSCs paid upon certain redemptions of Class B shares of the
Fund. During the period April 30, 1996 (the date on which Class
C shares were first offered for sale to the public) to December
31, 1996 and during the fiscal the fiscal year ended December 31,
1997, IMDI received $677 and $6,782, respectively, in CDSCs paid
on certain redemptions of Class C shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy Growth
Fund $150,873, $134,278 and $105,281, respectively, in sales
commissions, of which $23,327, $20,447 and $16,522, respectively,
was retained after dealers' reallowances. During the fiscal
years ended December 31, 1995, 1996 and 1997, IMDI received
$8,722, $3,923 and $15,497, respectively, in CDSCs paid upon
certain redemptions of Class B shares of the Fund. During the
period April 30, 1996 (the date on which Class C shares were
first offered for sale to the public) to December 31, 1996 and
during the fiscal year ended December 31, 1997, IMDI received $0
and $48, respectively, in CDSCs paid certain redemptions of Class
C shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy Growth
with Income Fund $143,107, $96,130 and $71,705, respectively, in
sales commissions, of which $22,948, $15,183 and $11,042,
respectively, was retained after dealers' re-allowances. During
the fiscal years ended December 31, 1995, 1996 and 1997, IMDI
received $26,361, $29,227 and $22,502, respectively, in CDSCs on
certain redemptions of Class B shares of the Fund. During the
period April 30, 1996 (the date on which Class C shares were
first offered for sale to the public) to December 31, 1996 and
during the fiscal year ended December 31, 1997, IMDI received $0
and $676, respectively in CDSCs paid on certain redemptions of
Class C shares of the Fund.
Each Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of each Fund. Each Distribution Agreement may be terminated with
respect to a particular Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the particular
Fund or by a Fund by vote of either a majority of the outstanding
voting securities of the Fund or a majority of the Independent
Trustees on 60 days' written notice to IMDI. Each Distribution
Agreement shall terminate automatically in the event of its
assignment.
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of each Fund. At a
meeting held on December 5-6, 1997, the Board last approved the
Rule 18f-3 plan. The key features of the Rule 18f-3 plan are as
follows: (i) shares of each class of a Fund represent an equal
pro rata interest in that Fund and generally have identical
voting, dividend, liquidation, and other rights, preferences,
powers, restrictions, limitations, qualifications, terms and
conditions, except that each class bears certain class-specific
expenses and has separate voting rights on certain matters that
relate solely to that class or in which the interests of
shareholders of one class differ from the interests of
shareholders of another class; (ii) subject to certain
limitations described in the Prospectus, shares of a particular
class of a Fund may be exchanged for shares of the same class of
another Ivy fund; and (iii) a Fund's Class B shares will convert
automatically into Class A shares of that Fund after a period of
eight years, based on the relative net asset value of such shares
at the time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on
behalf of each Fund, in accordance with Rule 12b-1 under the 1940
Act, separate Rule 12b-1 distribution plans pertaining to the
Funds' Class A, Class B and Class C shares (each, a "Plan"). In
adopting each Plan, a majority of the Independent Trustees have
concluded in accordance with the requirements of Rule 12b-1 that
there is a reasonable likelihood that each Plan will benefit each
Fund and its shareholders. The Trustees of the Trust believe
that the Plans should result in greater sales and/or fewer
redemptions of each Fund's shares, although it is impossible to
know for certain the level of sales and redemptions of a Fund's
shares in the absence of a Plan or under an alternative
distribution arrangement.
Under each Plan, each Fund pays IMDI a service fee, accrued
daily and paid monthly, at the annual rate of up to 0.25% of the
average daily net assets attributable to its Class A, Class B or
Class C shares, as the case may be. The services for which
service fees may be paid include, among other things, advising
clients or customers regarding the purchase, sale or retention of
shares of the Fund, answering routine inquiries concerning the
Fund and assisting shareholders in changing options or enrolling
in specific plans. Pursuant to each Plan, service fee payments
made out of or charged against the assets attributable to a
Fund's Class A, Class B or Class C shares must be in
reimbursement for services rendered for or on behalf of the
affected class. The expenses not reimbursed in any one month may
be reimbursed in a subsequent month. The Class A Plan does not
provide for the payment of interest or carrying charges as
distribution expenses.
Under the Funds' Class B and Class C Plans, each Fund also
pays IMDI a distribution fee, accrued daily and paid monthly, at
the annual rate of 0.75% of the average daily net assets
attributable to its Class B or Class C shares. IMDI may reallow
to dealers all or a portion of the service and distribution fees
as IMDI may determine from time to time. The distribution fee
compensates IMDI for expenses incurred in connection with
activities primarily intended to result in the sale of the Funds'
Class B or Class C shares, including the printing of prospectuses
and reports for persons other than existing shareholders and the
preparation, printing and distribution of sales literature and
advertising materials. Pursuant to each Class B and Class C
Plan, IMDI may include interest, carrying or other finance
charges in its calculation of distribution expenses, if not
prohibited from doing so pursuant to an order of or a regulation
adopted by the SEC.
Among other things, each Plan provides that (1) IMDI will
submit to the Board at least quarterly, and the Trustees will
review, written reports regarding all amounts expended under the
Plan and the purposes for which such expenditures were made;
(2) each Plan will continue in effect only so long as such
continuance is approved at least annually, and any material
amendment thereto is approved, by the votes of a majority of the
Board, including the Independent Trustees, cast in person at a
meeting called for that purpose; (3) payments by each Fund under
each Plan shall not be materially increased without the
affirmative vote of the holders of a majority of the outstanding
shares of the relevant class; and (4) while each Plan is in
effect, the selection and nomination of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust
shall be committed to the discretion of the Trustees who are not
"interested persons" of the Trust.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid by a Fund. IMDI also may make
payments (such as the service fee payments described above) to
unaffiliated broker-dealers for services rendered in the
distribution of each Fund's shares. To qualify for such
payments, shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or broker if
at the end of each year the amount of shares held does not exceed
a minimum amount. The minimum holding period and minimum level
of holdings will be determined from time to time by IMDI.
A report of the amount expended pursuant to each Plan, and
the purposes for which such expenditures were incurred, must be
made to the Board for its review at least quarterly.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Bond Fund paid IMDI $273,837, $247,382 and $247,405,
respectively, pursuant to the Class A plan. During the fiscal
years ended December 31, 1995, 1996 and 1997, Ivy Bond Fund paid
IMDI $36,359, $50,248 and $89,680, respectively, pursuant to the
Class B plan. During the period April 30, 1996 (the date on
which Class C shares of Ivy Bond Fund were first offered for sale
to the public) to December 31, 1996 and during the fiscal year
ended December 31, 1997, Ivy Bond Fund paid IMDI $2,093 and
$21,819, respectively, pursuant to the Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy US Emerging Growth Fund paid IMDI $70,182, $130,888 and
$159,113, respectively, pursuant to the Class A Plan. During the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy US
Emerging Growth Fund paid IMDI $93,593, $240,031 and $430,766,
respectively, pursuant to the Class B Plan. During the period
April 30, 1996 (the date on which Class C shares of Ivy US
Emerging Growth Fund were first offered for sale to the public)
to December 31, 1996 and during the fiscal year ended December
31, 1997, Ivy US Emerging Growth Fund paid IMDI $10,082 and
$78,377, respectively, pursuant to the Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth Fund paid IMDI $115,730, $153,152 and $176,461,
respectively, pursuant to the Class A Plan. During the fiscal
years ended December 31, 1995, 1996 and 1997, Ivy Growth Fund
paid IMDI $20,164, $32,851 and $42,336, respectively, pursuant to
the Class B Plan. During the period April 30, 1996 (the date on
which Class C shares of Ivy Growth Fund were first offered for
sale to the public) to December 31, 1996 and during the fiscal
year ended December 31, 1997, Ivy Growth Fund paid IMDI $297 and
$1,788, respectively, pursuant to the Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth with Income Fund paid IMDI $105,143, $126,322
and $141,009, respectively, pursuant to the Class A plan. During
the fiscal years ended December 31, 1995, 1996 and 1997, Ivy
Growth with Income Fund paid IMDI $76,355, $114,350 and $160,873,
respectively, pursuant to the Class B Plan. During the period
April 30, 1996 (the date on which Class C shares of Ivy Growth
with Income Fund were first offered for sale to the public) to
December 31, 1996 and during the fiscal year ended December 31,
1997, Ivy Growth with Income Fund paid IMDI $2,093 and $6,307,
respectively, pursuant to the Class C plan.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Bond Fund: advertising, $7,684; printing and mailing of
prospectuses to persons other than current shareholders, $68,145;
compensation to dealers, $47,490; compensation to sales
personnel, $227,395; seminars and meetings, $11,872; travel and
entertainment, $19,468; general and administrative, $164,999;
telephone, $6,196; and occupancy and equipment rental, $16,129.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Bond Fund: advertising, $860; printing and mailing of
prospectuses to persons other than current shareholders, $7,001;
compensation to dealers, $71,489; compensation to sales
personnel, $23,224; seminars and meetings, $17,872; travel and
entertainment, $1,898; general and administrative, $15,167;
telephone, $614; and occupancy and equipment rental, $1,646.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Bond Fund: advertising, $247; printing and mailing of
prospectuses to persons other than current shareholders, $1,879;
compensation to dealers, $35,182; compensation to sales
personnel, $6,199; seminars and meetings, $8,796; travel and
entertainment, $485; general and administrative, $3,650;
telephone, $160; and occupancy and equipment rental, $438.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
US Emerging Growth Fund: advertising, $5,412; printing and
mailing of prospectuses to persons other than current
shareholders, $14,668; compensation to dealers, $36,926;
compensation to sales personnel, $148,719; seminars and meetings,
$9,232; travel and entertainment, $12,633; general and
administrative, $102,388; telephone, $4,000; and occupancy and
equipment rental, $10,526.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
US Emerging Growth Fund: advertising, $3,744; printing and
mailing of prospectuses to persons other than current
shareholders, $9,947; compensation to dealers, $197,802;
compensation to sales personnel, $101,852; seminars and meetings,
$44,450; travel and entertainment, $8,591; general and
administrative, $69,129; telephone, $2,728; and occupancy and
equipment rental, $7,209.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
US Emerging Growth Fund: advertising, $729; printing and mailing
of prospectuses to persons other than current shareholders,
$1,871; compensation to dealers, $55,765; compensation to sales
personnel, $19,487; seminars and meetings, $13,941; travel and
entertainment, $1,624; general and administrative, $12,905;
telephone, $518; and occupancy and equipment rental, $1,379.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Growth Fund: advertising, $25,408; printing and mailing of
prospectuses to persons other than current shareholders, $72,158;
compensation to dealers, $141,999; compensation to sales
personnel, $745,122; seminars and meetings, $35,500; travel and
entertainment, $63,766; general and administrative, $537,694;
telephone, $20,273; and occupancy and equipment rental, $52,836.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Growth Fund: advertising, $340; printing and mailing of
prospectuses to persons other than current shareholders, $943;
compensation to dealers, $17,897; compensation to sales
personnel, $9,828; seminars and meetings, $4,474; travel and
entertainment, $835; general and administrative, $6,970;
telephone, $266; and occupancy and equipment rental, $697.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Growth Fund: advertising, $20; printing and mailing of
prospectuses to persons other than current shareholders, $46;
compensation to dealers, $2,254; compensation to sales personnel,
$515; seminars and meetings, $564; travel and entertainment, $41;
general and administrative, $319; telephone, $13; and occupancy
and equipment rental, $36.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Growth with Income Fund: advertising, $5,300; printing and
mailing of prospectuses to persons other than current
shareholders, $15,208; compensation to dealers, $36,749;
compensation to sales personnel, $153,301; seminars and meetings,
$9,187; travel and entertainment, $13,121; general and
administrative, $109,764; telephone, $4,164; and occupancy and
equipment rental, $10,865.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Growth with Income Fund: advertising, $1,355; printing and
mailing of prospectuses to persons other than current
shareholders, $3,715; compensation to dealers, $81,619;
compensation to sales personnel, $38,235; seminars and meetings,
$20,405; travel and entertainment, $3,229; general and
administrative, $26,595; telephone, $1,030; and occupancy and
equipment rental, $2,710.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Growth with Income Fund: advertising, $85; printing and mailing
of prospectuses to persons other than current shareholders, $168;
compensation to dealers, $23,981; compensation to sales
personnel, $2,045; seminars and meetings, $5,995; travel and
entertainment, $155; general and administrative, $1,110;
telephone, $52; and occupancy and equipment rental, $144.
Each Plan may be amended at any time with respect to the
class of shares of the Fund to which the Plan relates by vote of
the Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of considering
such amendment. Each Plan may be terminated at any time with
respect to the class of shares of the particular Fund to which
the Plan relates, without payment of any penalty, by vote of a
majority of the Independent Trustees, or by vote of a majority of
the outstanding voting securities of that class.
If the Distribution Agreement or the Distribution Plans are
terminated (or not renewed) with respect to any of the Ivy funds
(or class of shares thereof), each may continue in effect with
respect to any other fund (or Class of shares thereof) as to
which they have not been terminated (or have been renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109 (the "Custodian"), maintains
custody of the assets of each Fund held in the United States.
Rules adopted under the 1940 Act permit the Trust to maintain its
foreign securities and cash in the custody of certain eligible
foreign banks and securities depositories. Pursuant to those
rules, the Custodian has entered into subcustodial agreements for
the holding of each Fund's foreign securities. With respect to
each Fund, the Custodian may receive, as partial payment for its
services to the Funds, a portion of the Trust's brokerage
business, subject to its ability to provide best price and
execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for each Fund.
As compensation for those services, Ivy Bond Fund pays MIMI a
monthly fee plus out-of-pocket expenses as incurred. The monthly
fee is based upon the net assets of the particular Fund at the
preceding month end at the following rates: $1,000 when the net
assets are less than $20 million; $1,500 when the net assets are
$20 to $75 million; $4,000 when the net assets are $75 to $100
million; and $6,000 when the net assets are over $100 million.
As compensation for those services, Ivy Growth Fund, Ivy Growth
with Income Fund and Ivy US Emerging Growth Fund each pays MIMI a
monthly fee plus out-of-pocket expenses as incurred. The monthly
fee is based upon the net assets of the particular Fund at the
preceding month end at the following rates: $1,250 when net
assets are $10 million and under; $2,500 when net assets are $20
over $10 million to $40 million; $5,000 when net assets are over
$40 million to $75 million; and $6,500 when net assets are over
$75 million.
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Bond Fund paid $102,160, $95,017 and $100,392, respectively,
to MIMI under such agreement. During the fiscal years ended
December 31, 1995, 1996 and 1997, Ivy US Emerging Growth Fund
paid MIMI $45,324, $89,558 and $96,822, respectively, under such
agreement. During the fiscal years ended December 31, 1995, 1996
and 1997, Ivy Growth Fund paid MIMI $103,945, $131,740 and
$104,714, respectively under such agreement. During the fiscal
years ended December 31, 1995, 1996 and 1997, Ivy Growth with
Income Fund paid MIMI $60,915, $87,182 and $92,373, respectively,
pursuant to such agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service
Agreement, IMSC, a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Each Fund (except for Ivy Bond
Fund) pays a monthly fee at an annual rate of $20.00 per open
account. Ivy Bond Fund pays $20.75 per open account for Class A,
Class B and Class C and $10.25 per open account for Class I. In
addition, each Fund pays a monthly fee at an annual rate of $4.58
per account that is closed plus certain out-of-pocket expenses.
Such fees and expenses for the fiscal year ended December 31,
1997 for Ivy Bond Fund, Ivy US Emerging Growth Fund, Ivy Growth
Fund and Ivy Growth with Income Fund totalled $169,538, $292,622,
$790,101 and $217,740, respectively. Certain broker-dealers that
maintain shareholder accounts with a Fund through an omnibus
account provide transfer agent and other shareholder-related
services that would otherwise be provided by IMSC if the
individual accounts that comprise the omnibus account were opened
by their beneficial owners directly. IMSC pays such broker-
dealers a per account fee for each open account within the
omnibus account, or a fixed rate (e.g., .10%) fee, based on the
average daily net asset value of the omnibus account (or a
combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI
provides certain administrative services to each Fund. As
compensation for these services, each Fund (except for Ivy Bond
Fund with respect to its Class I shares only) pays MIMI a monthly
fee at the annual rate of .10% of that Fund's average daily net
assets. Ivy Bond Fund pays MIMI a monthly fee at the annual rate
of .01% of its average daily net assets for Class I. Such fees
for the fiscal year ended December 31, 1997 for Ivy Bond Fund,
Ivy US Emerging Growth Fund, Ivy Growth Fund and Ivy Growth with
Income Fund totalled $110,112, $114,559, $328,742 and $83,202,
respectively.
Outside of providing administrative services to the Trust,
as described above, MIMI may also act on behalf of IMDI in paying
commissions to broker-dealers with respect to sales of Class B
and Class C shares of each Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public
accountants, has been selected as auditors for the Trust. The
audit services performed by Coopers & Lybrand L.L.P., include
audits of the annual financial statements of each of the funds of
the Trust. Other services provided principally relate to filings
with the SEC and the preparation of the funds' tax returns.
Year 2000 Risks. The services provided to the Funds by IMI,
MIMI and the Funds' other service providers are dependent on
those service providers' computer systems. Many computer
software and hardware systems in use today cannot distinguish
between the year 2000 and the year 1900 because of the way dates
are encoded and calculated (the "Year 2000 Problem"). The
failure to make this distinction could have a negative
implication on handling securities trades, pricing and account
services. IMI, MIMI and the Funds' other service providers are
taking steps that each believes are reasonably designed to
address the Year 2000 Problem with respect to the computer
systems that they use. The Funds believe these steps will be
sufficient to avoid any material adverse impact on the Funds. At
this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Funds.
CAPITALIZATION AND VOTING RIGHTS
Ivy Bond Fund results from a reorganization of Mackenzie
Fixed Income Trust, a series of Mackenzie Series Trust, which
reorganization was approved by shareholders of the Fund on
December 15, 1994. The capitalization of the Trust consists of
an unlimited number of shares of beneficial interest (no par
value per share). When issued, shares of each class of each Fund
are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of a Fund has preemptive rights
or subscription rights.
The Amended and Restated Declaration of Trust permits the
Trustees to create separate series or portfolios and to divide
any series or portfolio into one or more classes. The Trustees
have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for Ivy International Fund and Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class
shares for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy US Emerging Growth Fund (formerly Ivy
Emerging Growth Fund until January 15, 1998), Ivy Global Fund,
Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund II, Ivy High Yield Fund (formerly Ivy
International Bond Fund until January 28, 1998), Ivy South
America Fund (formerly Ivy Latin America Strategy Fund until
January 15, 1998), Ivy Developing Nations Fund (formerly Ivy New
Century Fund until January 15, 1998) and Ivy Pan-Europe Fund, as
well as Class I shares for Ivy Bond Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy High Yield Fund and Ivy International Small Companies
Fund.
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of each Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of a Fund are entitled to vote alone on matters that
only affect that Fund. All classes of shares of a Fund will vote
together, except with respect to the distribution plan applicable
to that Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all
funds of the Trust, but affecting the funds differently, separate
votes by the shareholders of each fund are required. Approval of
an investment advisory agreement and a change in fundamental
policies would be regarded as matters requiring separate voting
by the shareholders of each fund of the Trust. If the Trustees
determine that a matter does not affect the interests of a Fund,
then the shareholders of that Fund will not be entitled to vote
on that matter. Matters that affect the Trust in general, such
as ratification of the selection of independent public
accountants, will be voted upon collectively by the shareholders
of all funds of the Trust.
As used in this SAI and the Prospectus, the phrase "majority
vote of the outstanding shares" of a Fund means the vote of the
lesser of: (1) 67% of the shares of that Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of that Fund (or of the
Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by a Fund, the matter shall have
been effectively acted upon with respect to that Fund if a
majority of the outstanding voting securities of that Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 26(c) of the Act were
applicable.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A shares, except that of the outstanding
Class A shares of Ivy Bond Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 1,098,779.728 shares (37.37%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class B shares, except that of the outstanding
Class B shares of Ivy Growth Fund, IBT (custodian) FBO G.
Pattyson, P.O. Box 11, Terrace Bay, Ontario, Canada POT 2WO,
owned of record 17,745.276 shares (7.33%); and except that of the
outstanding Class B shares of Ivy Growth with Income Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 191,412.628 shares
(10.75%); and except that of the outstanding Class B shares of
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 339,527.965 shares (19.89%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class C shares, except that of the outstanding
Class C shares of Ivy Bond Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 629,396.958 shares (73.32%); and except that of
the outstanding Class C shares of Ivy Growth Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 4,134.133 shares
(38.54%), Ramond James & Assoc.Inc., FBO Rafter L. Cattle Co.,
HRC 77 #441, Uvalde, TX 78801, owned of record 2,739.579 shares
(25.54%), Painewebber, P.O. Box 3321, Weehawken, NJ 07087-8154
owned of record 1,375.981 shares (12.82%), Martin S Sawyer & Ruth
C Sawyer, 2301 Freemont Drive, Sarasota, FL 34238-3016, owned of
record 563.386 shares (5.25%), and Southwest Securities Inc.,
P.O. Box 509002, Dallas, TX 75250, owned of record 542.000 shares
(5.05%); and except that of the outstanding Class C shares of Ivy
Growth with Income Fund, Gaston R Levy, 50 Woodfall Road ,
Belmont, MA 02178, owned of record 25,996.360 shares (7.38%), Ann
Marie Chenoweth, 7 Myers Farm Rd., Hingham, MA 02043, owned of
record 25,298.237 shares (7.18%), Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 21,254.724 shares (6.04%), and S Joseph Hoffman,
28 Hidden Way, Andover, MA 01810, owned of record 20,481.233
shares (5.82%); and except that of the outstanding Class C shares
of Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 101,388.092 shares (29.79%).
To the knowledge of the Trust, as of April 17, 1998,
no shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Advisor Class shares, except that of the
outstanding Advisor Class shares of Ivy Bond Fund, Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303-9998, owned of record 25,904.301 shares
(81.09%), and Charles Schwab & Co. Inc., 101 Montgomery Street,
San Francisco, CA 94104, owned of record 1,905.016 shares
(5.96%).
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of a Fund held personally liable
for the obligations of that Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
NET ASSET VALUE
The net asset value per share of a Fund is computed by
dividing the value of the Fund's aggregate net assets (i.e., its
total assets less its liabilities) by the number of the Fund's
shares outstanding. For purposes of determining a Fund's
aggregate net assets, receivables are valued at their realizable
amounts. A Fund's liabilities, if not identifiable as belonging
to a particular class of the Fund, are allocated among the Fund's
several classes based on their relative net asset size.
Liabilities attributable to a particular class are charged to
that class directly. The total liabilities for a class are then
deducted from the class's proportionate interest in the Fund's
assets, and the resulting amount is divided by the number of
shares of the class outstanding to produce its net asset value
per share.
A security listed or traded on a recognized stock exchange
or The Nasdaq Stock Market Inc. ("Nasdaq") is valued at the
security's last sale price on the exchange on which the security
is principally traded. If no sale is reported at that time, the
average between the current bid and asked price is used. The
value of a foreign security is determined in its national
currency as of the normal close of trading on the foreign
exchange on which it is traded or as of the close of regular
trading on the Exchange, if that is earlier, and that value is
then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined. All other
securities for which OTC market quotations are readily available
are valued at the average between the current bid and asked
price.
Debt securities normally are valued on the basis of quotes
obtained from brokers and dealers (or pricing services that take
into account appropriate valuation factors). Interest is accrued
daily. Money market instruments are valued at amortized cost,
which the Board believes approximates market value. Options are
valued at the last sale price on the exchange on which they
principally are traded, if available, and otherwise are valued at
the last offering price, in the case of written options, and the
last bid price, in the case of purchased options. Exchange
listed and widely-traded OTC futures (and options thereon) are
valued at the most recent settlement price. Securities and other
assets for which market prices are not readily available are
valued at fair value as determined by IMI and approved by the
Board. Trading in securities on European and Far Eastern
securities exchanges is normally completed before the close of
regular trading on the Exchange. Trading on these foreign
exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of
the national business holidays identified above). If events
materially affecting the value of a Fund's portfolio securities
occur between the time when these foreign exchanges close and the
time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and
approved by the Board.
Portfolio securities are valued (and net asset value per
share is determined) as of the close of regular trading on the
Exchange (normally 4:00 p.m., eastern time) on each day the
Exchange is open for trading. The Exchange and the Trust's
offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On those days when either or both of the
Funds' Custodian or the Exchange close early as a result of a
partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption
requests must be received.
The sale of a Fund's shares will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the Fund's best
interest to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to
have above average potential for capital appreciation. Common
stocks are disposed of in situations where it is believed that
potential for such appreciation has lessened or that other common
stocks have a greater potential. Therefore, a Fund may purchase
and sell securities without regard to the length of time the
security is to be, or has been, held. A change in securities
held by a Fund is known as "portfolio turnover" and may involve
the payment by that Fund of dealer markup or underwriting
commission and other transaction costs on the sale of securities,
as well as on the reinvestment of the proceeds in other
securities. A Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities
for the most recently completed fiscal year by the monthly
average of the value of the portfolio securities owned by the
Fund during that year. For purposes of determining a Fund's
portfolio turnover rate, all securities whose maturities at the
time of acquisition were one year or less are excluded. The
annual portfolio turnover rates for the Funds are provided in the
Prospectus under "The Funds' Financial Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC, less any applicable CDSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the
value of its net assets, or (iii) for such other periods as the
SEC may by order permit for the protection of shareholders of a
Fund.
Under unusual circumstances, when the Board deems it in the
best interest of a Fund's shareholders, the Fund may make payment
for shares repurchased or redeemed in whole or in part in
securities of that Fund taken at current values. If any such
redemption in kind is to be made, each Fund may make an election
pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of that Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those accounts of shareholders who have
maintained an investment, including sales charges paid, of less
than $1,000 in a Fund for a period of more than 12 months. All
accounts below that minimum will be redeemed simultaneously when
MIMI deems it advisable. The $1,000 balance will be determined
by actual dollar amounts invested by the shareholder, unaffected
by market fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to redeem such
account, and the shareholder shall have 60 days from the date of
such letter to invest such additional sums as shall raise the
value of such account above that minimum. Should the shareholder
fail to forward such sum within 60 days of the date of the
Trust's letter of notification, the Trust will redeem the shares
held in such account and transmit the redemption in value thereof
to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by a Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require
personal identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions, a
Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of each Fund
will automatically convert to Class A shares of the respective
Fund, based on the relative net asset values per share of the two
classes, no later than the month following the eighth anniversary
of the initial issuance of such Class B shares of the particular
Fund occurs. For the purpose of calculating the holding period
required for conversion of Class B shares, the date of initial
issuance shall mean: (1) the date on which such Class B shares
were issued, or (2) for Class B shares obtained through an
exchange, or a series of exchanges, (subject to the exchange
privileges for Class B shares) the date on which the original
Class B shares were issued. For purposes of conversion of
Class B shares, Class B shares purchased through the reinvestment
of dividends and capital gain distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time
any Class B shares in the shareholder's regular account (other
than those shares in the sub-account) convert to Class A shares,
a pro rata portion of the Class B shares in the sub-account will
also convert to Class A shares. The portion will be determined
by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares
not acquired through the reinvestment of dividends and capital
gain distributions.
TAXATION
The following is a general discussion of certain tax rules
thought to be applicable with respect to the Funds. It is merely
a summary and is not an exhaustive discussion of all possible
situations or of all potentially applicable taxes. Accordingly,
shareholders and prospective shareholders should consult a
competent tax adviser about the tax consequences to them of
investing in the Funds.
Each Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, each Fund
must, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale
or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the particular Fund's assets is
represented by cash, U.S. Government securities, the securities
of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the particular
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, each Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
each Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the particular Fund in October, November or
December of the year with a record date in such a month and paid
by that Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar
year the distributions are declared, rather than the calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or
call option is not included in income at the time of receipt. If
the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by a Fund is exercised, thereby requiring the
Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will
be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which a Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by a Fund at the
end of each taxable year (and on certain other dates prescribed
in the Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for Federal income
tax purposes. The straddle rules may affect the character of
gains or losses realized by a Fund. In addition, losses realized
by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in
which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the
consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term
capital gain realized by a Fund, which is taxed as ordinary
income when distributed to shareholders.
A Fund may make one or more of the elections available under
the Code which are applicable to straddles. If a Fund makes any
of the elections, the amount, character and timing of the
recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain options,
futures and forward contracts, gains or losses attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to
its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross
income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which a Fund held the PFIC shares. A Fund
itself will be subject to tax on the portion, if any, of an
excess distribution that is so allocated to prior Fund taxable
years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, a Fund generally
would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If a Fund invests in certain high yield original issue
discount obligations issued by corporations, a portion of the
original issue discount accruing on the obligation may be
eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company
taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated
by the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by a Fund
may be treated as having acquisition discount, or OID in the case
of certain types of debt securities. Generally, a Fund will be
required to include the acquisition discount, or OID, in income
over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections
applicable to debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition
of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by a Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Fund to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the
revised alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by a Fund as capital gain dividends, are taxable to
individual shareholders at a maximum 20% or 28% capital gains
rate (depending on the Fund's holding period for the assets
giving rise to the gain), whether paid in cash or in shares, and
regardless of how long the shareholder has held the Fund's
shares; such distributions are not eligible for the dividends
received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share
received equal to the net asset value of a share of a Fund on the
distribution date. A distribution of an amount in excess of a
Fund's current and accumulated earnings and profits will be
treated by a shareholder as a return of capital which is applied
against and reduces the shareholder's basis in his or her shares.
To the extent that the amount of any such distribution exceeds
the shareholder's basis in his or her shares, the excess will be
treated by the shareholder as gain from a sale or exchange of the
shares. Shareholders will be notified annually as to the U.S.
Federal tax status of distributions and shareholders receiving
distributions in the form of newly issued shares will receive a
report as to the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by a Fund, such
distribution generally will be taxable even though it represents
a return of invested capital. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption
sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder
on the sale of Fund shares held by the shareholder for six-months
or less will be treated for tax purposes as a long-term capital
loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
In some cases, shareholders will not be permitted to take
all or portion of their sales loads into account for purposes of
determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st
day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in a Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by
that country.
If more than 50% of the value of a Fund's total assets at
the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and may elect to "pass-
through" to that Fund's shareholders the amount of foreign income
and similar taxes paid by that Fund. Pursuant to this election,
a shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her pro
rata share of the foreign income and similar taxes paid by a
Fund, and will be entitled either to deduct his or her pro rata
share of foreign income and similar taxes in computing his or her
taxable income or to use it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be notified
within 60 days after the close of a Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that
year and, if so, such notification will designate (1) the
shareholder's portion of the foreign taxes paid to each such
country and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if a
Fund makes the election described in the preceding paragraph, the
source of that Fund's income flows through to its shareholders.
With respect to a Fund, gains from the sale of securities
generally will be treated as derived from U.S. sources and
section 988 gains will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, including
foreign source passive income received from a Fund. In addition,
the foreign tax credit may offset only 90% of the revised
alternative minimum tax imposed on corporations and individuals.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
or the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross
proceeds from the redemption of the particular Fund's shares,
except in the case of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the
case of non-exempt shareholders if (1) the shareholder fails to
furnish a Fund with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the
IRS notifies the shareholder or the particular Fund that the
shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to
certify that he or she is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions
or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to a Fund or shareholders. Shareholders
are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of the
Funds may be compared, in reports and promotional literature, to:
(i) the S&P 500 Index, the Dow Jones Industrial Average ("DJIA"),
or other unmanaged indices so that investors may compare each
Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research
firm that ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return
from an investment in a Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses.
In addition, the Trust may, from time to time, include the
yield (with respect to Ivy Bond Fund only), the average annual
total return and the cumulative total return of shares of a Fund
in advertisements, promotional literature or reports to
shareholders or prospective investors.
YIELD. Quotations of yield for a specific class of shares
of a Fund will be based on all investment income attributable to
that class earned during a particular 30-day (or one month)
period (including dividends and interest), less expenses
attributable to that class accrued during the period ("net
investment income"), and will be computed by dividing the net
investment income per share of that class earned during the
period by the maximum offering price per share (in the case of
Class A shares) or the net asset value per share (in the case of
Class B and Class C shares) on the last day of the period,
according to the following formula:
YIELD = 2[({(a-b)/cd} + 1){superscript 6}-1]
Where: a = dividends and interest earned during the
period attributable to a specific class
of shares,
b = expenses accrued for the period
attributable to that class (net of
reimbursements),
c = the average daily number of shares of
that class outstanding during the period
that were entitled to receive dividends,
and
d = the maximum offering price per share (in
the case of Class A shares) or the net
asset value per share (in the case of
Class B shares, Class C shares and Class
I shares) on the last day of the period.
The yield for Class A, Class B and Class C shares of Ivy
Bond Fund for the 30-day period ended December 31, 1997 was
6.53%, 6.13%, and 6.14%, respectively. As of December 31, 1997,
there were no outstanding Class I shares of Ivy Bond Fund.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized
average annual total return ("Standardized Return") for a
specific class of shares of a Fund will be expressed in terms of
the average annual compounded rate of return that would cause a
hypothetical investment in that class of a Fund made on the first
day of a designated period to equal the ending redeemable value
("ERV") of such hypothetical investment on the last day of the
designated period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to
purchase shares of a specific class
T = the average annual total return of shares of
that class
n = the number of years
ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period.
For purposes of the above computation for a Fund, it is
assumed that all dividends and capital gains distributions made
by a Fund are reinvested at net asset value in additional shares
of the same class during the designated period. In calculating
the ending redeemable value for Class A shares and assuming
complete redemption at the end of the applicable period, the
maximum 5.75% (4.75% for Ivy Bond Fund) sales charge is deducted
from the initial $1,000 payment and, for Class B and Class C
shares, the applicable CDSC imposed upon redemption of Class B or
Class C shares held for the period is deducted. Standardized
Return quotations for the Funds do not take into account any
required payments for federal or state income taxes.
Standardized Return quotations for Class B shares for periods of
over eight years will reflect conversion of the Class B shares to
Class A shares at the end of the eighth year. Standardized
Return quotations are determined to the nearest 1/100 of 1%.
A Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective
investors total return data that are not calculated according to
the formula set forth above ("Non-Standardized Return"). Neither
initial nor CDSCs are taken into account in calculating Non-
Standardized Return; a sales charge, if deducted, would reduce
the return.
The following tables summarize the calculation of
Standardized and Non-Standardized Return for the Class A, Class
B, Class C and Class I (for Ivy Bond Fund) shares of the Funds
for the periods indicated. In determining the average annual
total return for a specific class of shares of a Fund, recurring
fees, if any, that are charged to all shareholder accounts are
taken into consideration. For any account fees that vary with
the size of the account of a Fund, the account fee used for
purposes of the following computations is assumed to be the fee
that would be charged to the mean account size of the particular
Fund. Shares of Ivy Bond Fund outstanding as of March 31, 1994
were designated Class A shares of the Fund. Shares of each of
Ivy US Emerging Growth Fund, Ivy Growth Fund and Ivy Growth with
Income Fund outstanding as of October 22, 1993 have been
redesignated as "Class A" shares of each respective Fund.
IVY BOND FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[7]
One year ended
December 31,
1997: 6.56% 6.12% 10.11% N/A
Five years ended
December 31,
1997: 8.40% N/A N/A N/A
Ten years ended
December 31,
1997: 9.51% N/A N/A N/A
Inception[#] to
December 31,
1997:[8] N/A 7.87% 12.03% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6] CLASS I[7]
One year ended
December 31,
1997: 11.87% 11.12% 11.11% N/A
Five years ended
December 31,
1997: 9.46% N/A N/A N/A
Ten years ended
December 31,
1997: 10.05% N/A N/A N/A
Inception[#] to
December 31,
1997:[8] N/A 8.51% 12.03% N/A
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 4.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
Class I shares are not subject to an initial or a CDSC;
therefore, the Non-Standardized Return figures would be
identical to the Standardized Return figures.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] Until December 31, 1994, MIMI served as investment adviser
to Ivy Bond Fund, which until that date was a series of
Mackenzie Series Trust. The inception date for the Fund
(and the Class A shares of the Fund) was September 6, 1985;
the inception date for the Class B and Class I shares of the
Fund was April 1, 1994; and the inception date for the Class
C shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997, the
five years ended December 31, 1997 and the ten years
ended December 31, 1997 would have been 6.56%, 8.40%
and 9.08%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 6.12% and 7.87%,
respectively. (Since the inception date for Class B shares
of the Fund was April 1, 1994, there were no Class B shares
outstanding for the duration of the five year or ten year
periods ending December 31, 1997.)
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended December 31, 1997 and for the period from inception
through December 31, 1997 would have been 10.11% and 12.03%,
respectively. (Since the inception date for Class C shares
of the Fund was April 30, 1996, there were no Class C shares
outstanding for the duration of the five year or ten year
periods ending December 31, 1997.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31, 1997 and the ten years ended
December 31, 1997 would have been 11.87%, 9.46% and 9.61%,
respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ending December 31, 1997 and the
period from inception through December 31, 1997 would have
been 11.12% and 8.51%, respectively. (Since the inception
date for Class B shares of the Fund was April 1, 1994, there
were no Class B shares outstanding for the duration of the
five year or ten year periods ending December 31, 1997.)
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ending December 31, 1997 and the
period from inception through December 31, 1997 would have
been 11.11% and 12.03%, respectively. (Since the inception
date for Class C shares of the Fund was April 30, 1997,
there were no Class C shares outstanding for the duration of
the five year or ten year periods ending December 31,
1997.)
[7] No Class I shares were outstanding during the time periods
indicated.
[8] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY US EMERGING GROWTH FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: (1.74)% (1.47)% 2.58%
Inception[#] to
December 31,
1997:[7] 21.51% 14.13% (.64)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: 4.26% 3.53% 3.58%
Inception[#] to
December 31,
1997:[7] 23.04% 14.45% (.64)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy US Emerging Growth Fund was
March 3, 1993. Class A shares of the Fund were first
offered for sale to the public on April 30, 1993, and
Class B shares of the Fund were first offered for sale
to the public on October 23, 1993. The inception date
for the Class C shares of the Fund was April 30, 1996
[1] The Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (1.74)% and
21.48%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (1.47)% and
14.09%, respectively.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 2.58% and (.64)%,
respectively.
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 4.26% and 23.01%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 3.53% and 14.41%, respectively.
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 3.58% and (.64)%, respectively.
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY GROWTH FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: 5.27% 5.69% 9.58%
Five years ended
December 31,
1997: 11.35% N/A N/A
Ten years ended
December 31,
1997: 12.48% N/A N/A
Inception[#] to
December 31,
1997:[7] N/A 11.42% 9.47%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: 11.69% 10.69% 10.58%
Five years ended
December 31,
1997: 12.68% N/A N/A
Ten years ended
December 31,
1997: 13.15% N/A N/A
Inception[#] to
December 31,
1997:[7] N/A 11.76% 9.47%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Growth Fund (and for Class A
shares of the Fund) was March 1, 1984. The inception date
for Class B shares of the Fund was October 23, 1993. The
inception date for Class C shares of the Fund is April 30,
1996
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997, the
five years ended December 31, 1997 and the ten years
ended December 31, 1997 would have been 5.27%, 11.31%
and 12.45%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 5.69% and 11.37%,
respectively. (Since the inception date for Class B shares
of the Fund was October 23, 1993, there were no Class B
shares outstanding for the duration of the five year or ten
year periods ending December 31, 1997.)
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
period ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 9.58% and 9.47%,
respectively. (Since the inception date for Class C shares
of the Fund was April 30, 1996, there were no Class C shares
outstanding for the duration of the five year or ten year
periods ending December 31, 1997.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31, 1997 and the ten years ended
December 31, 1997 would have been 11.69%, 12.64% and 13.12%,
respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 10.69% and 11.70%, respectively. (Since the inception
date for Class B shares of the Fund was October 23, 1993,
there were no Class B shares outstanding for the duration of
the five year or ten year periods ending December 31, 1997.)
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year period ended December 31, 1997 and
the period from inception through December 31, 1997 would
have been 10.58% and 9.47%, respectively. (Since the
inception date for Class C shares of the Fund was April 30,
1996, there were no Class C shares outstanding for the
duration of the five year or ten year periods ending
December 31, 1997.)
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY GROWTH WITH INCOME FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: 14.58% 15.74% 19.70%
Five years ended
December 31,
1997: 14.22% N/A N/A
Ten years ended
December 31,
1997: 14.61% N/A N/A
Inception[#] to
December 31,
1997:[7] N/A 13.96% 20.00%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: 21.57% 20.74% 20.70%
Five years ended
December 31,
1997: 15.58% N/A N/A
Ten years ended
December 31,
1997: 15.29% N/A N/A
Inception[#] to
December 31,
1997:[7] N/A 14.25% 20.00%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Growth with Income Fund (and the
Class A shares of the Fund) was April 1, 1984; the inception
date for Class B shares of the Fund was October 23, 1993;
and the inception date for the Class C shares of the Fund is
April 30, 1996. The inception of Class C shares of the Fund
coincided with the redesignation as "Class D" those shares
of Ivy Growth with Income Fund that were initially issued as
"Ivy Growth with Income Fund -- Class C" to shareholders of
Mackenzie Growth & Income Fund, a former series of the
Company, in connection with the reorganization between that
fund and Ivy Growth with Income Fund, which shares are not
offered for sale to the public.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997, the
five years ended December 31, 1997 and the ten years
ended December 31, 1997 would have been 14.58%, 14.22%
and 14.59%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 15.74% and 13.96%,
respectively. (Since the inception date for Class B shares
of the Fund was October 23, 1993, there were no Class B
shares outstanding for the duration of the five year or ten
year periods ending December 31, 1997.)
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
period ended December 31, 1997 and for the period from
inception through December 31, 1997 would have been 19.70%
and 20.00%, respectively. (Since the inception date for
Class C shares of the Fund was April 30, 1996, there were no
Class C shares outstanding for the duration of the five year
or ten year periods ending December 31, 1997.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31, 1997 and the ten years ended
December 31, 1997 would have been 21.57%, 15.58% and 15.27%,
respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 20.74% and 14.25%, respectively. (Since the inception
date for Class B shares of the Fund was October 23, 1993,
there were no Class B shares outstanding for the duration of
the five year or ten year periods ending December 31, 1997.)
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year period ended December 31, 1997 and
for the period from inception through December 31, 1997
would have been 20.70% and 20.00%, respectively. (Since the
inception date for Class C shares of the Fund was April 30,
1996, there were no Class C shares outstanding for the
duration of the five year or ten year periods ending
December 31, 1997.)
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
CUMULATIVE TOTAL RETURN. Cumulative total return is the
cumulative rate of return on a hypothetical initial investment of
$1,000 in a specific Class of shares of a Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of a Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
the Fund shares. Cumulative total return is calculated by
computing the cumulative rates of return of a hypothetical
investment in a specific Class of shares of a Fund over such
periods, according to the following formula (cumulative total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000
to purchase shares of a specific Class
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
IVY BOND FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 4.75% sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 6.56% 49.68% 148.15% N/A
Class B 6.12% N/A[**] N/A[**] 32.88%
Class C 10.11% N/A[**] N/A[**] 20.90%
Class I N/A[**] N/A[**] N/A[**] N/A[**]
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 11.87% 57.14% 160.53% N/A
Class B 11.12% N/A[**] N/A[**] 35.88%
Class C 11.11% N/A[**] N/A[**] 20.90%
Class I N/A[**] N/A[**] N/A[**] N/A[**]
___________________________
[*] Until December 31, 1994, MIMI served as investment adviser
to Ivy Bond Fund, which until that date was a series of
Mackenzie Series Trust. The inception date for the Fund
(and the Class A shares of Ivy Bond Fund) was September 6,
1985; the inception date for the Class B and Class I shares
of the Fund was April 1, 1994. The inception date for Class
C shares of the Fund was April 30, 1996.
[**] No such shares were outstanding for the duration of the time
period indicated.
IVY US EMERGING GROWTH FUND. The following table summarizes
the calculation of Cumulative Total Return for the periods
indicated through December 31, 1997, assuming the maximum 5.75%
sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (1.74)% 148.38%
Class B (1.47)% 74.01%
Class C 2.58% (1.06)%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 4.26% 163.53%
Class B 3.53% 76.01%
Class C 3.58% (1.06)%
___________________________
[*] The inception date for Ivy US Emerging Growth Fund was
March 3, 1993. Class A shares of the Fund were first
offered for sale to the public on April 30, 1993, and
Class B shares of the Fund were first offered for sale
to the public on October 23, 1993. The inception date
for Class C shares of the Fund was April 30, 1996.
IVY GROWTH FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 5.27% 71.20% 224.17% N/A
Class B 5.69% N/A[**] N/A[**] 57.33%
Class C 9.58% N/A[**] N/A[**] 16.32%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 11.69% 81.64% 243.95% N/A
Class B 10.69% N/A[**] N/A[**] 59.33%
Class C 10.58% N/A[**] N/A[**] 16.32%
___________________________
[*] The inception date for Ivy Growth Fund (and for Class A
shares of the Fund) was March 1, 1984. The inception date
for the Class B shares of the Fund was October 23, 1993.
The inception date for Class C shares of the Fund was April
30, 1996.
[**] No such shares were outstanding for the duration of the time
period indicated.
IVY GROWTH WITH INCOME FUND. The following table summarizes
the calculation of Cumulative Total Return for the periods
indicated through December 31, 1997, assuming the maximum 5.75%
sales charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 14.58% 94.43% 290.91% 614.24%
Class B 15.74% N/A[**] N/A[**] 72.87%
Class C 19.70% N/A[**] N/A[**] 35.63%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 26.57% 106.29% 314.76% 657.81%
Class B 20.74% N/A[**] N/A[**] 74.87%
Class C 20.70% N/A[**] N/A[**] 35.63%
___________________________
[*] The inception date for Ivy Growth with Income Fund (and the
Class A shares of the Fund) was April 1, 1984; the inception
date for the Class B shares of the Fund was October 23,
1993. The inception date for Class C shares of the Fund was
April 30, 1996.
[**] No such shares were outstanding for the duration of the time
period indicated.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for a Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of the Fund. These
factors and possible differences in the methods used in
calculating performance quotations should be considered when
comparing performance information regarding a Fund's shares with
information published for other investment companies and other
investment vehicles. Performance quotations should also be
considered relative to changes in the value of a Fund's shares
and the risks associated with a Fund's investment objectives and
policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can
be no assurance that any historical performance quotation will
continue in the future.
The Funds may also cite endorsements or use for comparison
their performance rankings and listings reported in such
newspapers or business or consumer publications as, among others:
AAII Journal, Barron's, Boston Business Journal, Boston Globe,
Boston Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31,
1997, Statement of Assets and Liabilities as of December 31,
1997, Statement of Operations for the fiscal year ended December
31, 1997, Statement of Changes in Net Assets for the fiscal years
ended December 31, 1996, and December 31, 1997, Financial
Highlights, Notes to Financial Statements, and Report of
Independent Accountants are included in each Fund's December 31,
1997 Annual Report to shareholders, which are incorporated by
reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
AND COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue. Issuers rated Prime-2 are deemed to have a strong ability
for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
IVY BOND FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US EMERGING GROWTH FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
April 30, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy South America Fund) is
diversified. This Statement of Additional Information ("SAI")
relates to the Advisor Class shares of the four portfolios listed
above (collectively, the "Funds," and each, a "Fund"). The other
fourteen portfolios of the Trust are described in separate SAIs.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Funds' Advisor Class
shares dated April 30, 1998 (the "Prospectus"), which may be
obtained upon request and without charge from the Distributor at
the address and telephone number printed below. Advisor Class
shares are only offered to certain investors (see the
Prospectus). The Funds also offer Class A, Class B and Class C
(and Class I shares, in the case of Ivy Bond Fund), which are
described in a separate prospectus and SAI that may also be
obtained without charge from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 2
ADJUSTABLE RATE PREFERRED STOCKS. . . . . . . . . . . . . 2
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 3
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 3
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 3
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 3
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . 4
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 4
U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . 4
MUNICIPAL SECURITIES . . . . . . . . . . . . . . . . 5
INVESTMENT-GRADE DEBT SECURITIES . . . . . . . . . . 5
LOW-RATED DEBT SECURITIES. . . . . . . . . . . . . . 5
ZERO COUPON BONDS. . . . . . . . . . . . . . . . . . 6
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED"
SECURITIES . . . . . . . . . . . . . . . . . . . . . 7
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 7
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 8
DEPOSITORY RECEIPTS. . . . . . . . . . . . . . . . . 8
EMERGING MARKETS . . . . . . . . . . . . . . . . . . 9
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . 10
ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . 10
REAL ESTATE INVESTMENT TRUSTS (REITS) . . . . . . . . . . 11
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 11
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . 11
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 12
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 12
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 13
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 13
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 14
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 14
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . . 15
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 15
INTEREST RATE FUTURES CONTRACTS. . . . . . . . . . . 16
OPTIONS ON INTEREST RATE FUTURES CONTRACTS . . . . . 16
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS . . . . . . . . . . . . . . . . . . . . 17
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. . 17
SECURITIES INDEX FUTURES CONTRACTS. . . . . . . . . . . . 18
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 19
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . . 20
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 22
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 24
AUTOMATIC INVESTMENT METHOD. . . . . . . . . . . . . . . . . . 24
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 24
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 25
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 25
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 27
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 27
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 28
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . 28
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 28
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 28
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 29
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 31
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 35
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 36
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 38
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 38
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 40
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 40
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 41
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 41
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 41
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 41
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 42
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 42
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 44
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 45
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 45
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 47
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. . 48
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 48
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 49
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 50
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 50
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 51
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 51
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 52
YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . 52
AVERAGE ANNUAL TOTAL RETURN . . . . . . . . . . . . . . . 53
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . . 54
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 54
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . 55
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objectives and Policies" and "Risk Factors and
Investment Techniques." The different types of securities and
investment techniques used by the Funds involve varying degrees
of risk, and are described more fully under "Risk Factors,"
below.
IVY BOND FUND: Ivy Bond Fund seeks a high level of current
income by investing primarily in (i) investment grade corporate
bonds (those rated Aaa, Aa, A or Baa by Moody's Investors
Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P"), or, if unrated, are considered by IMI
to be of comparable quality) and (ii) U.S. Government securities
(including mortgage-backed securities issued by U.S. Government
agencies or instrumentalities) that mature in more than 13
months. As a fundamental policy, the Fund normally invests at
least 65% of its total assets in these fixed income securities.
For temporary defensive purposes, the Fund may invest without
limit in U.S. Government securities maturing in 13 months or
less, certificates of deposit, bankers' acceptances, commercial
paper and repurchase agreements. The Fund may also invest up to
35% of its total assets in such money market securities in order
to meet redemptions or to maximize income to the Fund while it is
arranging longer-term investments.
The Fund may invest up to 35% of its net assets in corporate
debt securities, including zero coupon bonds (subject to the
restrictions set forth below), rated Ba or below by Moody's or BB
or below by S&P, or, if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). The Fund will not invest in debt securities rated
less than C by either Moody's or S&P. During the twelve months
ended December 31, 1997, based upon the dollar-weighted average
ratings of the Fund's portfolio holdings at the end of each month
during that period, the Fund had the following percentages of its
total assets invested in debt securities rated in the categories
indicated (all ratings are by either Moody's or S&P, whichever
rating is higher): 4.5% in securities rated Aaa/AAA; 0% in
securities rated Aa/AA; 7.8% in securities rated A/A; 50.0% in
securities rated Baa/BBB; 14.4% in securities rated Ba/BB; 15.9%
in securities rated B/B; and 1.3% in securities rated Caa/CCC or
below. The asset composition of the Fund subsequent to the period
indicated may or may not approximate these figures. See
Appendix A in the SAI for a description of Moody's and S&P's
corporate bond ratings.
The Fund may invest up to 5% of its net assets in
dividend-paying common and preferred stocks (including adjustable
rate preferred stocks and securities convertible into common
stocks), municipal bonds, zero coupon bonds, and securities sold
on a "when-issued" or firm commitment basis. As a temporary
measure for extraordinary or emergency purposes, the Fund may
borrow from banks up to 10% of the value of its total assets.
The Fund may invest up to 20% of its net assets in debt
securities of foreign issuers, including non-U.S.
dollar-denominated debt securities, American Depository Receipts
("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares ("GDSs"),
Eurodollar securities and debt securities issued, assumed or
guaranteed by foreign governments or political subdivisions or
instrumentalities thereof. The Fund may also enter into forward
foreign currency contracts, but not for speculative purposes. The
Fund may not invest more than 15% of the value of its net assets
in illiquid securities.
The Fund may purchase put and call options, provided the
premium paid for such options does not exceed 10% of the Fund's
net assets. The Fund may also sell covered put options with
respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the
Fund's net assets is subject to being purchased upon the exercise
of the calls. For hedging purposes only, the Fund may engage in
transactions in interest rate futures contracts, currency futures
contracts and options on interest rate futures and currency
futures contracts.
IVY GROWTH FUND, IVY GROWTH WITH INCOME FUND, AND Ivy US
Emerging Growth Fund : Each Fund's principal investment
objective is long-term capital growth primarily through
investment in equity securities, with current income being a
secondary consideration. Ivy Growth with Income Fund has tended
to emphasize dividend-paying stocks more than the other two
Funds. Under normal conditions, each Fund invests at least 65% of
its total assets in common stocks and securities convertible into
common stocks. Ivy Growth Fund and Ivy Growth with Income Fund
invest primarily in common stocks of domestic corporations with
low price-earnings ratios and rising earnings, focusing on
established, financially secure firms with capitalizations over
$100 million and more than three years of operating history.
Ivy US Emerging Growth Fund invests primarily in common
stocks (or securities with similar characteristics) of small- and
medium-sized companies, both domestic and foreign, that are in
the early stages of their life cycles and that IMI believes have
the potential to become major enterprises.
All of the Funds may invest up to 25% of their net assets in
foreign equity securities, primarily those traded in European,
Pacific Basin and Latin American markets, some of which may be
emerging markets involving special risks, as described below.
Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed
for fundamental financial strength.
When circumstances warrant, each Fund may invest without
limit in investment grade debt securities (e.g., U.S. Government
securities or other corporate debt securities rated at least Baa
by Moody's or BBB by S&P, or, if unrated, are considered by IMI
to be of comparable quality), preferred stocks, or cash or cash
equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy Growth with Income Fund may invest less than 35% of its
net assets in debt securities rated Ba or below by Moody's or BB
or below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). Ivy Growth Fund may invest up to 5% of its net
assets in these low-rated debt securities. Neither Fund will
invest in debt securities rated less than C by either Moody's or
S&P. (As of December 31, 1997, neither Fund invested in low-rated
debt securities).
As a fundamental policy, each Fund may borrow up to 10% of
the value of its total assets, but only for temporary purposes
when it would be advantageous to do so from an investment
standpoint. All of the Funds may invest up to 5% of their net
assets in warrants. Each Fund may not invest more than 15% of its
net assets in illiquid securities. All of the Funds may enter
into forward foreign currency contracts. Ivy Growth Fund and Ivy
Growth with Income Fund may also invest in equity real estate
investment trusts.
Each of the Funds may write put options, with respect to not
more than 10% of the value of its net assets, on securities and
stock indices, and may write covered call options with respect to
not more than 25% of the value of its net assets. Each Fund may
purchase options, provided the aggregate premium paid for all
options held does not exceed 5% of its net assets. For hedging
purposes only, each Fund may enter into stock index futures
contracts as a means of regulating its exposure to equity
markets. A Fund's equivalent exposure in stock index futures
contracts will not exceed 15% of its total assets.
RISK FACTORS
ADJUSTABLE RATE PREFERRED STOCKS
Adjustable rate preferred stocks have a variable dividend,
generally determined on a quarterly basis according to a formula
based upon a specified premium or discount to the yield on a
particular U.S. Treasury security rather than a dividend which is
set for the life of the issue. Although the dividend rates on
these stocks are adjusted quarterly and their market value should
therefore be less sensitive to interest rate fluctuations than
are other fixed income securities and preferred stocks, the
market values of adjustable rate preferred stocks have fluctuated
and can be expected to continue to do so in the future.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, a Fund may invest in time deposits in
banks or savings and loan associations. Time deposits are
generally similar to certificates of deposit, but are
uncertificated. A Fund's investments in certificates of deposit,
time deposits, and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, (ii) U.S. banks which do not meet the $1 billion asset
requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the
"FDIC"), (iii) savings and loan associations which have total
assets in excess of $1 billion and which are members of the FDIC,
and (iv) foreign banks if the obligation is, in IMI's opinion, of
an investment quality comparable to other debt securities which
may be purchased by the particular Fund. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
BORROWING
Borrowing may exaggerate the effect on a Fund's net asset
value of any increase or decrease in the value of the Fund's
portfolio securities. Money borrowed will be subject to interest
costs (which may include commitment fees and/or the cost of
maintaining minimum average balances). Although the principal of
a Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus
increasing exposure to capital risk. All borrowings will be
repaid before any additional investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies,
corporations and finance companies. A Fund may invest in
commercial paper that is rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 by Standard & Poor's Corporation
("S&P") or, if not rated by Moody's or S&P, is issued by
companies having an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES
The convertible securities in which a Fund may invest
include corporate bonds, notes, debentures, preferred stock and
other securities that may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common
stock. Investments in convertible securities can provide income
through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or
exchange features. Because convertible securities can be
converted into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield
than the underlying equity, however, so that the price decline of
a convertible security may sometimes be less substantial than
that of the underlying equity security. The exchange ratio for
any particular convertible security may be adjusted from time to
time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio.
Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both
debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the
market value of convertible securities typically changes as the
market value of the underlying common stock changes, and,
therefore, also tends to follow movements in the general market
for equity securities. When the market price of the underlying
common stock increases, the price of a convertible security tends
to rise as a reflection of the value of the underlying common
stock, although typically not as much as the price of the
underlying common stock. While no securities investments are
without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same
issuer.
As debt securities, convertible securities are investments
that provide for a stream of income. Like all debt securities,
there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their
obligations (see following section). Convertible securities
generally offer lower yields than non-convertible securities of
similar quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
DEBT SECURITIES
IN GENERAL. Investing in debt securities involves both
interest rate and credit risk. Generally, the value of debt
instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt
securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds
with longer maturities generally are more volatile than bonds
with shorter maturities. The market value of debt securities also
varies according to the relative financial condition of the
issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury
(such as Treasury bills, notes, and bonds) and (2) Federal agency
obligations guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, which are mortgage-backed
securities). When such securities are held to maturity, the
payment of principal and interest is unconditionally guaranteed
by the U.S. Government, and thus they are of the highest possible
credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to
fluctuations in interest rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayments tends to
increase, thereby shortening the actual average life of the
security. Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the actual average life
of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates, and may involve significantly greater
price and yield volatility than traditional debt securities.
Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association and Student Loan Marketing Association.
MUNICIPAL SECURITIES. Municipal securities are debt
obligations that generally have a maturity at the time of issue
in excess of one year and are issued to obtain funds for various
public purposes. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities, or, in
some cases, from the proceeds of a special excise of a specific
revenue source. Industrial development bonds or private activity
bonds are issued by or on behalf of public authorities to obtain
funds for privately-operated facilities and are in most cases
revenue bonds that generally do not carry the pledge of the full
faith and credit of the issuer of such bonds, but depend for
payment on the ability of the industrial user to meet its
obligations (or on any property pledged as security).
The market prices of municipal securities, like those of
taxable debt securities, go up and down when interest rates
change. Thus, the net asset value per share can be expected to
fluctuate and shareholders may receive more or less than their
purchase price for shares they redeem.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is very
strong and differs from the highest rated issues only to a small
degree). Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective elements may
be lacking (i.e., such bonds lack outstanding investment
characteristics and have some speculative characteristics). A
Fund may invest in debt securities that are given an investment-
grade rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of comparable
quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa
or BBB and comparable unrated securities (commonly referred to as
"high yield" or "junk" bonds) are considered to be predominantly
speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The lower the ratings of
corporate debt securities, the more their risks render them like
equity securities. Such securities carry a high degree of risk
(including the possibility of default or bankruptcy of the
issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be
less liquid) than securities in the higher rating categories.
(See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective
characteristics.)
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issuers may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of a Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of a Fund's investment objectives by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of a Fund to retain
or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, Federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
While IMI may refer to ratings issued by established credit
rating agencies, it is not IMI's policy to rely exclusively on
such ratings, but rather to supplement such ratings with its own
independent and ongoing review of credit quality. A Fund's
achievement of its investment objective may, to the extent of its
investment in low-rated debt securities, be more dependent upon
IMI's credit analysis than would be the case if the Funds were
investing in higher quality bonds. Should the rating of a
portfolio security be downgraded, IMI will determine whether it
is in the affected Fund's best interest to retain or dispose of
the security. However, should any individual bond held by a Fund
be downgraded below a rating of C, IMI currently intends to
dispose of such bond based on then existing market conditions.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations
issued without any requirement for the periodic payment of
interest. Zero coupon bonds are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds. The
potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund
being forced to sell portfolio securities at a time when it might
otherwise choose not to sell these securities and when the Fund
might incur a capital loss on such sales. Because interest on
zero coupon obligations is not distributed to the Fund on a
current basis, but is in effect compounded, the value of such
securities of this type is subject to greater fluctuations in
response to changing interest rates than the value of debt
obligations which distribute income regularly.
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES
New issues of certain debt securities are often offered on a
"when-issued" basis, meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, the Fund
will maintain in a segregated account with its Custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date (usually
less than a year), and typically is individually negotiated and
privately traded by currency traders and their customers. A
forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between the
price at which they are buying and selling various currencies.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, at
the same time, they tend to limit any potential gain which might
result should the value of such currencies increase.
While a Fund may enter into forward contracts to reduce
currency exchange risks, changes in currency exchange rates may
result in poorer overall performance for a Fund than if it had
not engaged in such transactions. Moreover, there may be an
imperfect correlation between a Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by that Fund. An imperfect correlation of
this type may prevent a Fund from achieving the intended hedge or
expose the Fund to the risk of currency exchange loss.
A Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the
contract would obligate the Fund to deliver an amount of currency
in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Further, a Fund
generally will not enter into a forward contract with a term of
greater than one year.
A Fund will hold cash or liquid securities in a segregated
account with its Custodian in an amount equal (on a daily marked-
to-market basis) to the amount of the commitments under these
contracts. At the maturity of a forward contract, a Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an offsetting
contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a
party to the original forward contract.
FOREIGN SECURITIES
A Fund may invest in securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored American Depository
Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs"), Global Depository Shares ("GDSs")
and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in the Funds' domestic investments.
Although IMI intends to invest a Fund's assets only in
nations that are generally considered to have relatively stable
and friendly governments, there is the possibility of
expropriation, nationalization, repatriation or confiscatory
taxation, taxation on income earned in a foreign country and
other foreign taxes, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given
country), default on foreign government securities, political or
social instability or diplomatic developments which could affect
investments in securities of issuers in those nations. In
addition, in many countries there is less publicly available
information about issuers than is available for U.S. companies.
Moreover, foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to
those applicable to U.S. companies. In many foreign countries,
there is less governmental supervision and regulation of business
and industry practices, stock exchanges, brokers, and listed
companies than in the United States. Foreign securities
transactions may also be subject to higher brokerage costs than
domestic securities transactions. The foreign securities markets
of many of the countries in which a Fund may invest may also be
smaller, less liquid and subject to greater price volatility than
those in the United States. In addition, a Fund may encounter
difficulties or be unable to pursue legal remedies and obtain
judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no
return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could
cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to
settlement problems could result either in losses to a Fund
because of subsequent declines in the value of the portfolio
security or, if a Fund has entered into a contract to sell the
security, in possible liability to the purchaser. Fixed
commissions on some foreign securities exchanges are generally
higher than negotiated commissions on U.S. exchanges, although
IMI will endeavor to achieve the most favorable net results on a
Fund's portfolio transactions. It may be more difficult for a
Fund's agents to keep currently informed about corporate actions
such as stock dividends or other matters that may affect the
prices of portfolio securities. Communications between the
United States and foreign countries may be less reliable than
within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate the risks to
a Fund associated with the foregoing considerations through
investment variation and continuous professional management.
DEPOSITORY RECEIPTS. ADRs, GDRs and similar instruments,
the issuance of which is typically administered by a U.S. or
foreign bank or trust company, evidence ownership of underlying
securities issued by a U.S. or foreign corporation. ADRs are
publicly traded on exchanges or over-the-counter ("OTC") in the
United States. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying
securities. As a result, information concerning the issuer may
not be as current or as readily available as in the case of
sponsored depository instruments, and their prices may be more
volatile than if they were sponsored by the issuers of the
underlying securities.
EMERGING MARKETS. A Fund could have significant investments
in securities traded in emerging markets. Investors should
recognize that investing in such countries involves special
considerations, in addition to those set forth above, that are
not typically associated with investing in United States
securities and that may affect a Fund's performance favorably or
unfavorably.
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility;
(iii) certain national policies that may restrict a Fund's
investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until
relatively recently in certain Eastern European countries, of a
capital market structure or market-oriented economy; (vii) the
possibility that recent favorable economic developments in
Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of a Fund's investments. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, a Fund could
lose a substantial portion of any investments it has made in the
affected countries. Further, few (if any) accounting standards
exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial in relation to
the actual market values and may be adverse to a Fund's net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of a Fund's assets invested in such
country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to
the custody of a Fund's cash and securities, that Fund's
investment in such countries may be limited or may be required to
be effected through intermediaries. The risk of loss through
governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES. Investment in foreign securities
usually will involve currencies of foreign countries. A Fund may
also temporarily hold funds in bank deposits in foreign
currencies during the completion of investment programs and may
purchase forward foreign currency contracts. Because of these
factors, the value of the assets of a Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions
between various currencies. Although the Funds' Custodian values
each Fund's assets daily in terms of U.S. dollars, the Funds
generally do not convert their holdings of foreign currencies
into U.S. dollars on a daily basis. A Fund will do so from time
to time, however, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. A Fund will conduct its
foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to
purchase or sell foreign currencies.
Because a Fund normally will be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in U.S. markets. A Fund's
share price will reflect the movements of both the different
stock and bond markets in which it is invested (both U.S. and
foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar
against foreign currencies may account for part of a Fund's
investment performance. U.S. and foreign securities markets do
not always move in step with each other, and the total returns
from different markets may vary significantly. In addition,
significant uncertainty surrounds the proposed introduction of
the euro (a common currency for the European Union) in January
1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which
the Funds' assets are denominated may be devalued against the
U.S. dollar, resulting in a loss to the Funds.
ILLIQUID SECURITIES
A Fund may purchase securities other than in the open
market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities" or "not readily marketable"(i.e., they cannot be sold
to the public without registration under the Securities Act of
1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they
are subject to other legal or contractual delays in or
restrictions on resale). This investment practice, therefore,
could have the effect of increasing the level of illiquidity of a
Fund. It is a Fund's policy that illiquid securities (including
repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's
Board of Trustees has approved guidelines for use by IMI in
determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i)
only to qualified institutional buyers; (ii) in a privately
negotiated transaction to a limited number of purchasers; (iii)
in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for
which a registration statement is in effect under the 1933 Act.
Issuers of restricted securities may not be subject to the
disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded. If
adverse market conditions were to develop during the period
between a Fund's decision to sell a restricted or illiquid
security and the point at which the Fund is permitted or able to
sell such security, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted
securities, a Fund may be required to bear all or part of the
registration expenses. A Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, in such event, the Fund
may be liable to purchasers of such securities if the
registration statement prepared by the issuer is materially
inaccurate or misleading.
Since it is not possible to predict with assurance that the
market for securities eligible for resale under Rule 144A will
continue to be liquid, IMI will monitor such restricted
securities subject to the supervision of the Board of Trustees.
Among the factors IMI may consider in reaching liquidity
decisions relating to Rule 144A securities are: (1) the
frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security
and the nature of the market for the security (i.e., the time
needed to dispose of the security, the method of soliciting
offers, and the mechanics of the transfer).
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests
in real estate mortgages or equities for the benefit of its
investors. REITs are dependent upon management skill, may not be
diversified and are subject to the risks of financing projects.
Such entities are also subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended (the "Code"), and to
maintain exemption from the 1940 Act. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his
or her proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys
a money market instrument and obtains a simultaneous commitment
from the seller to repurchase the instrument at a specified time
and at an agreed-upon yield. Under guidelines approved by the
Board, a Fund is permitted to enter into repurchase agreements
only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other
securities that IMI has approved for use as collateral for
repurchase agreements and the collateral must be marked-to-market
daily. A Fund will enter into repurchase agreements only with
banks and broker-dealers deemed to be creditworthy by its Adviser
under the above-referenced guidelines. In the unlikely event of
failure of the executing bank or broker-dealer, a Fund could
experience some delay in obtaining direct ownership of the
underlying collateral and might incur a loss if the value of the
security should decline, as well as costs in disposing of the
security.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of small or new companies may be subject to more
abrupt or erratic market movements because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
WARRANTS
The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in a tandem with the prices of
the underlying securities, and are, therefore, considered
speculative investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a warrant held by
a Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. A Fund may engage in transactions in options on
securities and stock indices in accordance with its stated
investment objective and policies. A Fund may also purchase put
options on securities and may purchase and sell (write) put and
call options on stock indices. Options on securities and stock
indices purchased or written by a Fund will be limited to options
traded on national securities exchanges, boards of trade or
similar entities, or in the OTC markets.
A call option is a short-term contract (having a duration of
less than one year) pursuant to which the purchaser, in return
for a premium paid, has the right to buy the security underlying
the option at a specified exercise price at any time during the
term of the option. The writer of the call option, who receives
the premium, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise
price. A put option is a similar contract pursuant to which the
purchaser, in return for a premium paid, has the right to sell
the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the put
option, who receives the premium, has the obligation, upon
exercise of the option, to buy the underlying security at the
exercise price. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the
underlying security, the time remaining to expiration of the
option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the
Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the
exercise of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing
sale transaction can be effected at any particular time or at any
acceptable price. If any call or put option is not exercised or
sold, it will become worthless on its expiration date.
A Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by
the Fund if the premium, plus commission costs, paid by the Fund
to purchase the call or the put is less (or greater) than the
premium, less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if a call
or a put that a Fund has written lapses unexercised, because the
Fund would retain the premium. Any such gains (or losses) are
considered short-term capital gains (or losses) for Federal
income tax purposes. Net short-term capital gains, when
distributed by a Fund, are taxable as ordinary income. See
"Taxation."
A Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put previously purchased
by the Fund if the premium, less commission costs, received by
the Fund on the sale of the call or the put is greater (or less)
than the premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date, and
a Fund will realize a loss in the amount of the premium paid,
plus commission costs. Any such gain or loss will be long-term
or short-term gain or loss, depending upon a Fund's holding
period for the option.
Exchange-traded options generally have standardized terms
and are issued by a regulated clearing organization (such as the
Options Clearing Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by a Fund and
its counterparty (usually a securities dealer or a financial
institution) with no clearing organization guarantee. When a
Fund purchases an OTC option, it relies on the party from whom it
has purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty fails
to do so, a Fund will lose any premium paid for the option, as
well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to
determine the likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may write
(sell) covered call options on the Fund's securities in an
attempt to realize a greater current return than would be
realized on the securities alone. A Fund may also write covered
call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the
options). In view of the investment objectives of a Fund, the
Fund generally would write call options only in circumstances
where the investment adviser to the Fund does not anticipate
significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A Fund may write covered call options as described in the
Funds' Prospectus. A "covered" call option means generally that
so long as the Fund is obligated as the writer of a call option,
the Fund will (i) own the underlying securities subject to the
option, or (ii) have the right to acquire the underlying
securities through immediate conversion or exchange of
convertible preferred stocks or convertible debt securities owned
by the Fund. Although a Fund receives premium income from these
activities, any appreciation realized on an underlying security
will be limited by the terms of the call option. A Fund may
purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, a Fund receives a premium
for undertaking the obligation to sell the underlying security at
a fixed price during the option period, if the option is
exercised. So long as a Fund remains obligated as a writer of a
call option, it forgoes the opportunity to profit from increases
in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents
such a profit (and retains the risk of loss should the value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may
purchase a put option on an underlying security owned by the Fund
as a defensive technique in order to protect against an
anticipated decline in the value of the security. A Fund, as the
holder of the put option, may sell the underlying security at the
exercise price regardless of any decline in its market price. In
order for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise
price to cover the premium and transaction costs that a Fund must
pay. These costs will reduce any profit a Fund might have
realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce
any capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by a Fund for leveraging purposes.
A Fund may also purchase a put option on an underlying
security that it owns and at the same time write a call option on
the same security with the same exercise price and expiration
date. Depending on whether the underlying security appreciates
or depreciates in value, a Fund would sell the underlying
security for the exercise price either upon exercise of the call
option written by it or by exercising the put option held by it.
A Fund would enter into such transactions in order to profit from
the difference between the premium received by the Fund for the
writing of the call option and the premium paid by the Fund for
the purchase of the put option, thereby increasing the Fund's
current return. A Fund may write (sell) put options on
individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. A
Fund may purchase and sell (write) put and call options on
securities indices. An index assigns relative values to the
securities included in the index and the index fluctuates with
changes in the market values of the securities so included.
Options on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a specified
price, they give the purchaser the right to receive cash. The
amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiple (the
"multiplier"). The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function
similar to the unit of trading for a stock option. It determines
the total dollar value per contract of each point in the
difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on
different indices have different multipliers.
When a Fund writes a call or put option on a stock index,
the option is "covered", in the case of a call, or "secured", in
the case of a put, if the Fund maintains in a segregated account
with the Custodian cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain special risks. During the option
period, the covered call writer, in return for the premium on the
option, has given up the opportunity to profit from a price
increase in the underlying securities above the exercise price,
but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must
deliver the underlying securities (or cash in the case of an
index option) at the exercise price. If a put or call option
purchased by a Fund is not sold when it has remaining value, and
if the market price of the underlying security (or index), in the
case of a put, remains equal to or greater than the exercise
price or, in the case of a call, remains less than or equal to
the exercise price, a Fund will lose its entire investment in the
option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements
in a related security (or securities), the price of the put or
call option may move more or less than the price of the related
security (or securities). In this regard, there are differences
between the securities and options markets that could result in
an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. Furthermore,
if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the
price has risen or fallen more than the maximum amount specified
by the exchange. Closing transactions can be made for OTC
options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists.
There is no assurance that a Fund will be able to close out an
OTC option position at a favorable price prior to its expiration.
In the event of insolvency of the counterparty, a Fund might be
unable to close out an OTC option position at any time prior to
its expiration. Although a Fund may be able to offset to some
extent any adverse effects of being unable to liquidate an option
position, the Fund may experience losses in some cases as a
result of such inability.
A Fund's options activities may impact the level of its
portfolio turnover and brokerage commissions. See "Portfolio
Turnover."
A Fund's success in using options techniques depends, among
other things, on the Advisor's ability to predict accurately the
direction and volatility of price movements in the options and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. A Fund may enter into futures contracts and
options on futures contracts for hedging purposes. A futures
contract provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity at a
specified price and time. When a purchase or sale of a futures
contract is made by a Fund, the Fund is required to deposit with
its Custodian (or broker, if legally permitted) in a segregated
account a specified amount of cash or liquid securities ("initial
margin"). The margin required for a futures contract is set by
the exchange on which the contract is traded and may be modified
during the term of the contract. The initial margin is in the
nature of a performance bond or good faith deposit on the futures
contract which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been
satisfied. A futures contract held by a Fund is valued daily at
the official settlement price of the exchange on which it is
traded. Each day a Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures
contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by a Fund
but is instead a settlement between the Fund and the broker of
the amount one would owe the other if the futures contract
expired. In computing daily net asset value, a Fund will mark-
to-market its open futures position.
A Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts it has
written. Such margin deposits will vary depending on the nature
of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and
other futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, generally these
obligations are closed out prior to delivery of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
When purchasing a futures contract, a Fund will maintain in
a segregated account with its Custodian (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with a futures commission merchant ("FCM") as
margin, are equal to the market value of the futures contract.
Alternatively, a Fund may "cover" its position by purchasing a
put option on the same futures contract with a strike price as
high as or higher than the price of the contract held by the
Fund.
When selling a futures contact, a Fund will maintain with
its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by that Fund (or at a higher price if the
difference is maintained in cash or liquid assets in a segregated
account with the Fund's Custodian).
When selling a call option on a futures contract, a Fund
will maintain with its Custodian in a segregated account (and
mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with an FCM as margin, equal
the total market value of the futures contract underlying the
call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by
owning the instruments underlying the futures contract, or by
holding a separate call option permitting the Fund to purchase
the same futures contract at a price not higher than the strike
price of the call option sold by that Fund.
When selling a put option on a futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that equal the
purchase price of the futures contract less any margin on
deposit. Alternatively, a Fund may cover the position either by
entering into a short position in the same futures contract, or
by owning a separate put option permitting it to sell the same
futures contract so long as the strike price of the purchased put
option is the same or higher than the strike price of the put
option sold by the Fund.
INTEREST RATE FUTURES CONTRACTS. A Fund may engage in
interest rate futures contracts transactions for hedging purposes
only. An interest rate futures contract is an agreement between
parties to buy or sell a specified debt security at a set price
on a future date. The financial instruments that underlie
interest rate futures contracts include long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA certificates, and three-month
U.S. Treasury bills. In the case of futures contracts traded on
U.S. exchanges, the exchange itself or an affiliated clearing
corporation assumes the opposite side of each transaction (i.e.,
as buyer or seller). A futures contract may be satisfied or
closed out by delivery or purchase, as the case may be in the
cash financial instrument or by payment of the change in the cash
value of the index. Frequently, using futures to effect a
particular strategy instead of using the underlying or related
security will result in lower transaction costs being incurred.
A Fund may sell interest rate futures contracts in order to
hedge its portfolio securities whose value may be sensitive to
changes in interest rates. In addition, a Fund could purchase
and sell these futures contracts in order to hedge its holdings
in certain common stocks (such as utilities, banks and savings
and loans) whose value may be sensitive to changes in interest
rates. A Fund could sell interest rate futures contracts in
anticipation of or during a market decline to attempt to offset
the decrease in market value of its securities that might
otherwise result. When a Fund is not fully invested in
securities, it could purchase interest rate futures in order to
gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that it intends to purchase.
As such purchases are made, an equivalent amount of interest rate
futures contracts will be terminated by offsetting sales. In a
substantial majority of these transactions, a Fund would purchase
such securities upon termination of the futures position whether
the futures position results from the purchase of an interest
rate futures contract or the purchase of a call option on an
interest rate futures contract, but under unusual market
conditions, a futures position may be terminated without the
corresponding purchase of securities.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. Options on
interest rate futures give the purchaser the right (but not the
obligation), in return for the premium paid, to assume a position
in an interest rate futures contract at a specified exercise
price at a time during the period of the option.
Transactions in options on interest rate futures enable a
Fund to hedge against the possibility that fluctuations in
interest rates and other factors may result in a general decline
in prices of debt securities owned by the Fund. Assuming that
any decline in the securities being hedged is accomplished by a
rise in interest rates, the purchase of put options and sale of
call options on the futures contracts may generate gains which
can partially offset any decline in the value of the Fund's
portfolio securities which have been hedged. However, if after
the Fund purchases or sells an option on a futures contract the
value of the securities being hedged moves in the opposite
direction from that contemplated, the Fund may experience losses
in the form of premiums on such options which would partially
offset gains the Fund would have.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. A
Fund may engage in foreign currency futures contracts and related
options transactions for hedging purposes. A foreign currency
futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a foreign
currency at a specified price and time.
An option on a foreign currency futures contract gives the
holder the right, in return for the premium paid, to assume a
long position (call) or short position (put) in a futures
contract at a specified exercise price at any time during the
period of the option. Upon the exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true.
A Fund may purchase call and put options on foreign
currencies as a hedge against changes in the value of the U.S.
dollar (or another currency) in relation to a foreign currency in
which portfolio securities of the Fund may be denominated. A
call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of
foreign currency at a specified price during a fixed period of
time. The Fund may invest in options on foreign currency which
are either listed on a domestic securities exchange or traded on
a recognized foreign exchange.
In those situations where foreign currency options may not
be readily purchased (or where such options may be deemed
illiquid) in the currency in which the hedge is desired, the
hedge may be obtained by purchasing an option on a "surrogate"
currency (i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies).
A surrogate currency's exchange rate movements parallel that of
the primary currency. Surrogate currencies are used to hedge an
illiquid currency risk, when no liquid hedge instruments exist in
world currency markets for the primary currency.
A Fund will only enter into currency futures contracts and
futures options which are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity or quoted on
an automated quotation system. A Fund will not enter into a
futures contract or purchase an option thereon if, immediately
thereafter, the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open
futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into. A call
option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A
put option is "in the money" if the exercise price exceeds the
value of the futures contract that is the subject of the option.
For additional information about margin deposits required with
respect to futures contracts and options thereon, see "Futures
Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. A
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can
be no guarantee that there will be a correlation between price
movements in the hedging vehicle and in a Fund's portfolio
securities being hedged. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as
variations in speculative market demand for futures and futures
options on securities, including technical influences in futures
trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying
the standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or a futures
option position, and the Fund would remain obligated to meet
margin requirements until the position is closed. In addition,
there can be no assurance that an active secondary market will
continue to exist.
Currency futures contracts and options thereon may be traded
on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the United States; may not
involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such position
also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
SECURITIES INDEX FUTURES CONTRACTS
A Fund may enter into securities index futures contracts as
an efficient means of regulating the Fund's exposure to the
equity markets. A Fund will not engage in transactions in
futures contracts for speculation but only as a hedge against
changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which it intends to
purchase. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed
upon when the contract is made. Entering into a contract to buy
units of an index is commonly referred to as purchasing a
contract or holding a long position in the index. Entering into
a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. The value of a
unit is the current value of the stock index. For example, the
S&P 500 Index is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange (the "Exchange").
The S&P 500 Index assigns relative weightings to the 500 common
stocks included in the Index, and the Index fluctuates with
changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150).
The index futures contract specifies that no delivery of the
actual securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the
expiration of the contract. For example, if a Fund enters into a
futures contract to buy 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, a Fund will gain $2,000
(500 units x gain of $4). If a Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A Fund's success in
using hedging techniques depends, among other things, on IMI's
ability to predict correctly the direction and volatility of
price movements in the futures and options markets as well as in
the securities markets and to select the proper type, time and
duration of hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
A Fund's ability to hedge effectively all or a portion of
its securities through transactions in index futures (and
therefore the extent of its gain or loss on such transactions)
depends on the degree to which price movements in the underlying
index correlate with price movements in the Fund's securities.
Insofar as such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, a Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount as the
hedging instrument. This risk will increase as the composition
of a Fund's portfolio diverges from the composition of the
hedging instrument.
Although a Fund intends to establish positions in these
instruments only when there appears to be an active market, there
is no assurance that a liquid market will exist at a time when
the Fund seeks to close a particular option or futures position.
Trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers. In addition, the futures exchanges may suspend trading
after the price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, a Fund may experience
losses as a result of its inability to close out a position, and
it may have to liquidate other investments to meet its cash
needs.
Although some index futures contracts call for making or
taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
A Fund will only enter into index futures contracts or
futures options that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. A Fund will use futures
contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of
the CFTC.
When purchasing an index futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by a Fund.
When selling an index futures contract, a Fund will maintain
with its Custodian in a segregated account (and mark-to-market on
a daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting a Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if the
difference is maintained in cash or liquid assets in a segregated
account with the Fund's Custodian).
COMBINED TRANSACTIONS
A Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and some
combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in
the opinion of IMI, it is in the best interests of a Fund to do
so. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although
combined transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the management
objective.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set forth in the
Prospectus under "Investment Objectives and Policies," and the
investment restrictions set forth below are fundamental policies
of the Fund and may not be changed with respect to that Fund
without the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of that Fund. Under these
restrictions, each of Ivy Growth Fund, Ivy Growth with Income
Fund and Ivy US Emerging Growth Fund may not:
(i) purchase or sell real estate or commodities and
commodity contracts;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) participate in an underwriting or selling group in
connection with the public distribution of
securities except for its own capital stock;
(v) purchase from or sell to any of its officers or
trustees, or firms of which any of them are
members or which they control, any securities
(other than capital stock of the Fund), but such
persons or firms may act as brokers for the Fund
for customary commissions to the extent permitted
by the Investment Company Act of 1940;
(vi) make an investment in securities of companies in
any one industry (except obligations of domestic
banks or the U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment;
(vii) issue senior securities, except as appropriate to
evidence indebtedness which it is permitted to
incur, and except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities; provided that
collateral arrangements with respect to currency-
related contracts, futures contracts, options or
other permitted investments, including deposits of
initial and variation margin, are not considered
to be the issuance of senior securities for
purposes of this restriction;
(viii) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreement or (b) the purchase of
publicly distributed bonds, debentures and other
securities of a similar type, or privately placed
municipal or corporate bonds, debentures and other
securities of a type customarily purchased by
institutional investors or publicly traded in the
securities markets;
(ix) borrow money, except for temporary purposes where
investment transactions might advantageously
require it. Any such loan may not be for a period
in excess of 60 days, and the aggregate amount of
all outstanding loans may not at any time exceed
10% of the value of the total assets of the Fund
at the time any such loan is made.
Under the 1940 Act, a Fund is permitted, subject to each
Fund's investment restrictions, to borrow money only from banks.
IMI does not currently intend that any Fund borrow amounts in
excess of 5% of its total assets. Each of Ivy US Emerging
Growth Fund , Ivy Growth Fund and Ivy Growth with Income Fund
will continue to interpret fundamental investment restriction (i)
above as prohibiting investment in real estate limited
partnership interests; this restriction shall not, however,
prohibit investment in readily marketable securities of companies
that invest in real estate or interests therein, including REITs.
Further, as a matter of fundamental policy, each of Ivy Growth
Fund and Ivy Growth with Income Fund may not:
(i) invest more than 5% of the value of its total
assets in the securities of any one issuer (except
obligations of domestic banks or the U.S.
Government, its agencies, authorities and
instrumentalities);
(ii) purchase the securities of any other open-end
investment company, except as part of a plan of
merger or consolidation; or
(iii) hold more than 10% of the voting securities of any
one issuer (except obligations of domestic banks
or the U.S. Government, its agencies, authorities
and instrumentalities).
Further, as a matter of fundamental policy, each of Ivy Bond Fund
and Ivy US Emerging Growth Fund may not:
(i) purchase securities of any one issuer (except U.S.
Government securities) if as a result more than 5%
of the Fund's total assets would be invested in
such issuer or the Fund would own or hold more
than 10% of the outstanding voting securities of
that issuer; provided, however, that up to 25% of
the value of the Fund's total assets may be
invested without regard to these limitations.
Further, as a matter of fundamental policy, Ivy Bond Fund may
not:
(i) Invest in securities for the purpose of exercising
control over or management of the issuer;
(ii) Borrow amounts in excess of 10% of its total
assets, taken at the lower of cost or market
value, and then only from banks as a temporary
measure for extraordinary or emergency purposes.
(iii) Purchase the securities of issuers conducting
their principal business activities in the same
industry if immediately after such purchase the
value of the Fund's investments in such industry
would exceed 25% of the value of the total assets
of the Fund;
(iv) Act as an underwriter of securities;
(v) Issue senior securities, except insofar as the
Fund may be deemed to have issued a senior
security in connection with any repurchase
agreement or any permitted borrowing.
(vi) Invest in real estate, real estate mortgage loans,
commodities, commodity futures contracts or
interests in oil, gas and/or mineral exploration
or development programs, although a Fund may
purchase and sell (a) securities which are secured
by real estate, (b) securities of issuers which
invest or deal in real estate, and (c) futures
contracts as described in a Fund's Prospectus;
(vii) Participate on a joint or a joint and several
basis in any trading account in securities. The
"bunching" of orders of the Fund--or of the Fund
and of other accounts under the investment
management of the persons rendering investment
advice to the Fund--for the sale or purchase of
portfolio securities shall not be considered
participation in a joint securities trading
account;
(viii) Purchase securities on margin, except such short-
term credits as are necessary for the clearance of
transactions. The deposit or payment by a Fund of
initial or variation margin in connection with
futures contracts or related options transactions
is not considered the purchase of a security on
margin;
(ix) Make loans, except that this restriction shall not
prohibit (a) the purchase and holding of a portion
of an issue of publicly distributed debt
securities, (b) the lending of portfolio
securities (provided that the loan is secured
continuously by collateral consisting of U.S.
Government securities or cash or cash equivalents
maintained on daily marked-to-market basis in an
amount at least equal to the current market value
of the securities loaned), or (c) entry into
repurchase agreements with banks or broker-
dealers;
(x) Mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any
securities owned or held by the Fund (except as
may be necessary in connection with permitted
borrowings and then not in excess of 20% of the
Fund's total assets); provided, however, this does
not prohibit escrow, collateral or margin
arrangements in connection with its use of
options, short sales, futures contracts and
options on future contracts; or
(xi) Make short sales of securities or maintain a short
position.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund has adopted the
following additional restrictions, which are not fundamental and
which may be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory policy.
Under these restrictions, each Fund may not:
(i) purchase any security if, as a result, the Fund
would then have more than 5% of its total assets
(taken at current value) invested in securities of
companies (including predecessors) less than three
years old.
Further, as a matter of non-fundamental policy, each of Ivy US
Emerging Growth Fund , Ivy Growth Fund and Ivy Growth with
Income Fund may not:
(i) invest in oil, gas or other mineral leases or
exploration or development programs;
(ii) engage in the purchase and sale of puts, calls,
straddles or spreads (except to the extent
described in the Prospectus and in this SAI);
(iii) invest in companies for the purpose of exercising
control of management; or
(iv) invest more than 5% of its total assets in
warrants, valued at the lower of cost or market,
or more than 2% of its total assets in warrants,
so valued, which are not listed on either the New
York or American Stock Exchanges.
Further, as a matter of non-fundamental policy, each of Ivy
Growth Fund and Ivy Growth with Income Fund may not:
(i) invest more than 5% of the value of its total
assets in the securities of issuers which are not
readily marketable.
Further, as a matter of non-fundamental policy, each of Ivy Bond
Fund and Ivy US Emerging Growth Fund may not:
(i) invest more than 15% of its net assets taken at
market value at the time of investment in
"illiquid securities." Illiquid securities may
include securities subject to legal or contractual
restrictions on resale (including private
placements), repurchase agreements maturing in
more than seven days, certain options traded over
the counter that the Fund has purchased,
securities being used to cover certain options
that a fund has written, securities for which
market quotations are not readily available, or
other securities which legally or in IMI's
opinion, subject to the Board's supervision, may
be deemed illiquid, but shall not include any
instrument that, due to the existence of a trading
market, to the Fund's compliance with certain
conditions intended to provide liquidity, or to
other factors, is liquid.
Further, as a matter of non-fundamental policy, Ivy US
Emerging Growth Fund may not:
(i) purchase securities of other investment companies,
except in connection with a merger, consolidation
or sale of assets, and except that it may purchase
shares of other investment companies subject to
such restrictions as may be imposed by the 1940
Act and rules thereunder or by any state in which
its shares are registered.
Further, as a matter of non-fundamental policy, Ivy Bond Fund may
not:
(i) purchase or sell real estate limited partnership
interests; or
(ii) purchase or sell interests in oil, gas or mineral
leases (other than securities of companies that
invest in or sponsor such programs).
Whenever an investment objective, policy or restriction set
forth in the Prospectus or this SAI states a maximum percentage
of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in the percentage
which results from circumstances not involving any affirmative
action by a Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
that Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers, and (except as noted below) bears the cost
of providing, to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below
refer to funds, other than the Funds, whose shares are also
distributed by Ivy Mackenzie Distributors, Inc. ("IMDI"). These
funds are: Ivy Asia Pacific Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy Developing Nations Fund, Ivy Global Fund, Ivy
Global Science & Technology Fund, Ivy Global Natural Resources
Fund, Ivy High Yield Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy Pan-Europe Fund, Ivy South America Fund and Ivy Money Market
Fund (the other fourteen series of the Trust). Shareholders
should obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares except Class I. The minimum
initial and subsequent investment under this method is $250 per
month, (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, Advisor Class
shareholders of each Fund have an exchange privilege with other
Ivy funds (except Ivy International Fund). Before effecting an
exchange, shareholders should obtain and read the currently
effective prospectus for the fund into which the exchange is to
be made.
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
on the basis of the relative net asset value per Advisor Class
share. The minimum value of Advisor Class shares that may be
exchanged into an Ivy fund in which shares are not already held
is $10,000. No exchange out of a Fund (other than by a complete
exchange of all Fund shares) may be made if it would reduce the
shareholder's interest in the Advisor Class shares of the Fund to
less than $10,000. Exchanges are available only in states where
the exchange can legally be made.
Each exchange will be made on the basis of the relative net
asset value per share of the Ivy funds involved in the exchange
next computed following receipt by IMSC of telephone instructions
by IMSC or a properly executed request. Exchanges, whether
written or telephonic, must be received by IMSC by the close of
regular trading on the Exchange (normally 4:00 p.m., eastern
time) to receive the price computed on the day of receipt.
Exchange requests received after that time will receive the price
next determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Ivy funds will result in
a taxable gain or loss. Generally, this will be a capital gain
or loss (long-term or short-term, depending on the holding period
of the shares) in the amount of the difference between the net
asset value of the shares surrendered and the shareholder's tax
basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into
account in computing taxable gain or loss on an exchange. See
"Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
RETIREMENT PLANS
Shares may be purchased in connection with several types
of tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the Ivy funds in accordance with
the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be
at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several Ivy funds, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the Trust may
be used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in an Ivy fund if
that fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant,
whether the individual's contribution to an IRA is fully
deductible, partially deductible or not deductible depends on
(i) adjusted gross income and (ii) whether it is the individual
or the individual's spouse who is an active participant, in the
case of married individuals filing jointly. Contributions may be
made up to the maximum permissible amount even if they are not
deductible. Rollover contributions are not includible in income
for Federal income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, amounts withdrawn
and used to pay for deductible medical expenses and amounts
withdrawn by certain unemployed individuals not in excess of
amounts paid for certain health insurance premiums, amounts used
to pay certain qualified higher education expenses, and amounts
used within 120 days of the date the distribution is received to
pay for certain first-time homebuyer expenses. Distributions
must begin to be withdrawn not later than April 1 of the calendar
year following the calendar year in which the individual reaches
age 70-1/2. Failure to take certain minimum required distribu-
tions will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year
(other than 1997, 1998 or 1999) from an IRA (or from an IRA and
other retirement plans) may also result in a penalty tax.
ROTH IRAS: Shares of the Trust also may be used as a
funding medium for a Roth Individual Retirement Account ("Roth
IRA"). A Roth IRA is similar in numerous ways to the regular
(traditional) IRA, described above. Some of the primary
differences are as follows.
A single individual earning below $95,000 can contribute up
to $2,000 per year to a Roth IRA. The maximum contribution
amount diminishes and gradually falls to zero for single filers
with adjusted gross incomes ranging from $95,000 to $110,000.
Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA).
The maximum contribution amount for married couples filing
jointly phases out from $150,000 to $160,000. An individual
whose adjusted gross income exceeds the maximum phase-out amount
cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional
IRA and a Roth IRA as long as the total contribution to all IRAs
does not exceed $2,000. Contributions to a Roth IRA are not
deductible. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained
age 70 1/2.
No distributions are required to be taken prior to the death
of the original account holder. If a Roth IRA has been
established for a minimum of five years, distributions can be
taken tax-free after reaching age 59 1/2, for a first-time home
purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical
expenses, the purchase of health insurance for an unemployed
individual and education expenses.
An individual with an income of less than $100,000 (who is
not married filing separately) can roll his or her existing IRA
into a Roth IRA. However, the individual must pay taxes on the
taxable amount in his or her traditional IRA. Individuals who
complete the rollover in 1998 will be allowed to spread the tax
payments over a four-year period. After 1998, all taxes on such
a rollover will have to be paid in the tax year in which the
rollover is made.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more Ivy funds through a
qualified retirement plan, a Custodial Agreement and a Retirement
Plan are available from IMSC. The Retirement Plan may be adopted
as a profit sharing plan or a money purchase pension plan. A
profit sharing plan permits an annual contribution to be made in
an amount determined each year by the self-employed individual
within certain limits prescribed by law. A money purchase
pension plan requires annual contributions at the level specified
in the Custodial Agreement. There is no set-up fee for qualified
plans and the annual maintenance fee is $20.00 per account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code") permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan"), by telephone instructions or by delivery to
IMSC of a written election to have his or her shares withdrawn
periodically (minimum distribution amount -- $50), accompanied by
a surrender to IMSC of all share certificates then outstanding in
such shareholder's name, properly endorsed by the shareholder.
To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000 in
his or her account. Additional investments made by investors
participating in a Withdrawal Plan must equal at least $250 each
while the Withdrawal Plan is in effect. A Withdrawal Plan may
not be established if the investor is currently participating in
the Automatic Investment Method. A Withdrawal Plan may involve
the depletion of a shareholder's principal, depending on the
amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each Fund (except Ivy Bond Fund) may be purchased
in connection with investment programs established by employee or
other groups using systematic payroll deductions or other
systematic payment arrangements. The Trust does not itself
organize, offer or administer any such programs. However, it
may, depending upon the size of the program, waive the minimum
initial and additional investment requirements for purchases by
individuals in conjunction with programs organized and offered by
others. Unless shares of a Fund are purchased in conjunction
with IRAs (see "How to Buy Shares" in the Prospectus), such group
systematic investment programs are not entitled to special tax
benefits under the Code. The Trust reserves the right to refuse
purchases at any time or suspend the offering of shares in
connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check
writing, simplified redemptions and other optional privileges, as
described in the Prospectus, to shareholders using group
systematic investment programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay such fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI places orders for the purchase and sale of each Fund's
portfolio securities. All portfolio transactions are effected at
the best price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions and therefore,
brokerage commissions are usually not required to be paid by the
particular Fund for such purchases and sales (although the price
paid generally includes undisclosed compensation to the dealer).
The prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from
dealers normally reflect the spread between the bid and asked
prices. In connection with OTC transactions, IMI attempts to
deal directly with the principal market makers, except in those
circumstances where IMI believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions and
evaluates the reasonableness of commissions on the basis of
quality, quantity, and the nature of the firms' professional
services. Commissions to be charged and the rendering of
investment services, including statistical, research, and
counseling services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may be
used by IMI in servicing all of its accounts. In addition, not
all of these services may be used by IMI in connection with the
services it provides to a particular Fund or the Trust. IMI may
consider sales of shares of a Fund as a factor in the selection
of broker-dealers and may select broker-dealers who provide it
with research services. IMI will not, however, execute brokerage
transactions other than at the best price and execution.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Bond Fund paid brokerage commissions of $20,912, $398
and $1,361, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy US Emerging Growth Fund paid brokerage commissions of
$302,892, $426,676 and $583,738, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth Fund paid brokerage commissions of $666,385,
$883,583 and $683,881, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Growth with Income Fund paid brokerage commissions of
$192,913, $293,827 and $155,283, respectively.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each of these Funds
will accept securities only to increase its holdings in a
portfolio security or to take a new portfolio position in a
security that IMI deems to be a desirable investment for each the
Fund. While no minimum has been established, it is expected that
each the Fund will not accept securities having an aggregate
value of less than $1 million. The Trust may reject in whole or
in part any or all offers to pay for the Fund shares with
securities and may discontinue accepting securities as payment
for the Fund shares at any time without notice. The Trust will
value accepted securities in the manner and at the same time
provided for valuing portfolio securities of each the Fund, and
the Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will
only accept securities delivered in proper form and will not
accept securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 74 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1998).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 74 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1998); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998);Director of The
Mackenzie Funds Inc. (1994-
1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 77 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1998);Director of The
Mackenzie Funds Inc. (1987-
1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 72
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 51 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1998);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-1998).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 63 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 74 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1998).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 41 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1998); Vice President
of Mackenzie Series Trust
(1994-1998); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Trustee
of Mackenzie Series Trust
(1996-1998).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 53 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1998).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 56 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. Employees of IMI
are permitted to make personal securities transactions, subject
to the requirements and restrictions set forth in IMI's Code of
Ethics. The Code of Ethics is designed to identify and address
certain conflicts of interest between personal investment
activities and the interests of investment advisory clients such
as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment
Company Institute's Advisory Group on Personal Investing,
prohibits certain types of transactions absent prior approval,
applies to portfolio managers, traders, research analysts and
others involved in the investment advisory process, and imposes
time periods during which personal transactions may not be made
in certain securities, and requires the submission of duplicate
broker confirmations and monthly reporting of securities
transactions. Exceptions to these and other provisions of the
Code of Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1997)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES[*]
John S. $13,722 N/A N/A $15,000
Anderegg, Jr.
(Trustee)
Paul H. $13,722 N/A N/A $15,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $13,722 N/A N/A $15,000
Channick
(Trustee)
Frank W. $13,722 N/A N/A $15,000
DeFriece, Jr.
(Trustee)
Roy J. $13,722 N/A N/A $15,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $13,722 N/A N/A $15,000
Rosenthal
(Trustee)
Richard N. $13,722 N/A N/A $15,000
Silverman
(Trustee)
J. Brendan $13,722 N/A N/A $15,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] During the year ended December 31, 1997, the fund complex
consisted of the Trust, which had 17 funds at year end, and
Mackenzie Series Trust, an open-end, management investment
company comprised of 4 funds that were reorganized into
series of unaffiliated investment companies on September 5,
1997.
As of April 27, 1998, the Officers and Trustees of the Trust
as a group owned beneficially or of record less than 1% of the
outstanding Class A, Class B, Class C, Class I and Advisor Class
shares of the Funds and of the other fourteen Ivy funds that are
series of the Trust but that are not described in this SAI,
except that the Officers and Trustees of the Trust as a group
owned 2.838% and 2.348%, respectively, of Ivy Asia Pacific Fund
Class A shares and Ivy Global Natural Resources Fund Class A
shares as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to each Fund pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). The Agreement
was approved by the respective sole shareholder of Ivy Bond Fund
on December 31, 1994 and of Ivy US Emerging Growth Fund on
April 30, 1993 and by the respective shareholders of Ivy Growth
Fund and Ivy Growth with Income Fund on December 30, 1991. Prior
to the approval by the respective shareholders or sole
shareholder of each Fund, the Agreement was approved on September
29, 1994 with respect to Ivy Bond Fund, on February 19, 1993 with
respect to Ivy US Emerging Growth Fund and October 28,
1991 with respect to Ivy Growth Fund and Ivy Growth with Income
Fund by the Board, including a majority of the Trustees who are
neither "interested persons" (as defined in the 1940 Act) of the
Trust nor have any direct or indirect financial interest in the
operation of the distribution plan (see "Distribution Services")
or in any related agreement (the "Independent Trustees").
Until December 31, 1994, MIMI served as the investment
adviser to Ivy Bond Fund, which was a series of Mackenzie Series
Trust until it was reorganized as a series of the Trust on
December 31, 1994. On December 31, 1994, MIMI's interest in the
Agreement with respect to Ivy Bond Fund was assigned by MIMI to
IMI, which is a wholly owned subsidiary of MIMI. The provisions
of the Agreement remain unchanged by IMI's succession to MIMI
thereunder. MIMI, a Delaware corporation, has approximately 10%
of its outstanding common stock listed for trading on the TSE.
MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"),
150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario whose shares are
listed for trading on The TSE. MFC is registered in Ontario as a
mutual fund dealer and advises Ivy Canada Fund and Ivy Global
Natural Resources Fund. IMI currently acts as manager and
investment adviser to the following additional investment
companies registered under the 1940 Act (other than the Funds):
Ivy China Region Fund, Ivy Global Fund, Ivy International Fund,
Ivy South America Fund, Ivy Developing Nations Fund, Ivy High
Yield Fund, Ivy Global Science & Technology Fund, Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy Asia Pacific Fund, Ivy Pan-Europe Fund and Ivy Money Market
Fund.
The Agreement obligates IMI to make investments for the
accounts of each Fund in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Prospectus, the 1940 Act and the provisions of the Code
relating to regulated investment companies, subject to policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by these Funds and places
orders with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain business
management services. IMI is obligated to (1) coordinate with
each Fund's Custodian and monitor the services it provides to
that Fund; (2) coordinate with and monitor any other third
parties furnishing services to each Fund; (3) provide each Fund
with necessary office space, telephones and other communications
facilities as are adequate for the particular Fund's needs;
(4) provide the services of individuals competent to perform
administrative and clerical functions that are not performed by
employees or other agents engaged by the particular Fund or by
IMI acting in some other capacity pursuant to a separate
agreement or arrangements with the Fund; (5) maintain or
supervise the maintenance by third parties of such books and
records of the Trust as may be required by applicable Federal or
state law; (6) authorize and permit IMI's directors, officers and
employees who may be elected or appointed as trustees or officers
of the Trust to serve in such capacities; and (7) take such other
action with respect to the Trust, after approval by the Trust as
may be required by applicable law, including without limitation
the rules and regulations of the SEC and of state securities
commissions and other regulatory agencies.
Ivy Bond Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of
0.75% of the first $100 million of the Fund's average net assets,
reduced to 0.50% of the Fund's average net assets in excess of
$100 million. Ivy US Emerging Growth Fund and Ivy Growth
Fund each pay IMI a monthly fee for providing business management
and investment advisory services at an annual rate of 0.85% of
each Fund's average net assets. Ivy Growth with Income Fund
pays IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 0.75% of the
Funds average net assets.
For fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Bond Fund paid IMI $848,778, $781,647 and $800,555,
respectively (of which IMI reimbursed $2,615, $0 and $0,
respectively, pursuant to required expense limitations).
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy US Emerging Growth Fund paid IMI $318,186, $657,579 and
$973,756, respectively.
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Growth Fund paid IMI $2,278,390, $2,608,378 and $2,794,304,
respectively (of which IMI reimbursed $11,680, $12,486 and $0,
respectively, pursuant to voluntary expense limitations).
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Growth with Income Fund paid IMI $515,787, $629,322 and
$624,013, respectively.
Under the Agreement, the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits Ivy Emerging Market Fund's total
operating expenses (excluding Rule 12b-1 fees, interest, taxes,
brokerage commissions, litigation and indemnification expenses,
and extraordinary expenses) to an annual rate of 1.95% of the
Fund's average net assets, which may lower that Fund's expenses
and increase its yield. The Fund's expense limitation may be
terminated or revised at any time, at which time its expenses may
increase and its yield may be reduced.
On September 13, 1997, the Board (including a majority of
the Independent Trustees) last approved the continuance of the
Agreement with respect to each of Ivy Bond Fund, Ivy US Emerging
Growth Fund, Ivy Growth Fund and Ivy Growth with Income Fund.
Each Agreement will continue in effect with respect to each Fund
from year to year, or for more than the initial period, as the
case may be, only so long as the continuance is specifically
approved at least annually (i) by the vote of a majority of the
Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the particular Fund or (b) by the vote of a majority
of the entire Board. If the question of continuance of the
Agreements (or adoption of any new agreement) is presented to
shareholders, continuance (or adoption) shall be effected only if
approved by the affirmative vote of a majority of the outstanding
voting securities of the particular Fund. See "Capitalization
and Voting Rights."
Each Agreement may be terminated with respect to a
particular Fund at any time, without payment of any penalty, by
the vote of a majority of the Board, or by a vote of a majority
of the outstanding voting securities of that Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to
the Trust. The Agreement shall terminate automatically in the
event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of the Funds' shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on September 13, 1997. IMDI distributes shares of the
Funds through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the
Funds on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.
Under the Distribution Agreement, each Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses.
Each Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of each Fund. Each Distribution Agreement may be terminated with
respect to a particular Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the particular
Fund or by a Fund by vote of either a majority of the outstanding
voting securities of the Fund or a majority of the Independent
Trustees on 60 days' written notice to IMDI. Each Distribution
Agreement shall terminate automatically in the event of its
assignment.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid by a Fund. IMDI also may make
payments to unaffiliated broker-dealers for services rendered in
the distribution of each Fund's shares. To qualify for such
payments, shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or broker if
at the end of each year the amount of shares held does not exceed
a minimum amount. The minimum holding period and minimum level
of holdings will be determined from time to time by IMDI.
If a Distribution Agreement is terminated (or not renewed)
with respect to any of the Ivy funds (or class of shares
thereof), each may continue in effect with respect to any other
fund (or Class of shares thereof) as to which it has not been
terminated (or have been renewed).
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of each Fund. At a
meeting held on December 5-6, 1997, the Board last approved the
Rule 18f-3 plan. The key features of the Rule 18f-3 plan are as
follows: (i) shares of each class of a Fund represent an equal
pro rata interest in that Fund and generally have identical
voting, dividend, liquidation, and other rights, preferences,
powers, restrictions, limitations, qualifications, terms and
conditions, except that each class bears certain class-specific
expenses and has separate voting rights on certain matters that
relate solely to that class or in which the interests of
shareholders of one class differ from the interests of
shareholders of another class; (ii) subject to certain
limitations described in the Prospectus, shares of a particular
class of a Fund may be exchanged for shares of the same class of
another Ivy fund; and (iii) a Fund's Class B shares will convert
automatically into Class A shares of that Fund after a period of
eight years, based on the relative net asset value of such shares
at the time of conversion.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109 (the "Custodian"), maintains
custody of the assets of each Fund held in the United States.
Rules adopted under the 1940 Act permit the Trust to maintain its
foreign securities and cash in the custody of certain eligible
foreign banks and securities depositories. Pursuant to those
rules, the Custodian has entered into subcustodial agreements for
the holding of each Fund's foreign securities. With respect to
each Fund, the Custodian may receive, as partial payment for its
services to the Funds, a portion of the Trust's brokerage
business, subject to its ability to provide best price and
execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for each Fund.
As compensation for those services, Ivy Bond Fund pays MIMI a
monthly fee plus out-of-pocket expenses as incurred. The monthly
fee is based upon the net assets of the particular Fund at the
preceding month end at the following rates: $1,000 when the net
assets are less than $20 million; $1,500 when the net assets are
$20 to $75 million; $4,000 when the net assets are $75 to $100
million; and $6,000 when the net assets are over $100 million.
As compensation for those services, Ivy Growth Fund, Ivy Growth
with Income Fund and Ivy US Emerging Growth Fund each pays
MIMI a monthly fee plus out-of-pocket expenses as incurred. The
monthly fee is based upon the net assets of the particular Fund
at the preceding month end at the following rates: $1,250 when
net assets are $10 million and under; $2,500 when net assets are
$20 over $10 million to $40 million; $5,000 when net assets are
over $40 million to $75 million; and $6,500 when net assets are
over $75 million.
For the fiscal year ended December 31, 1995, 1996 and
1997, the Funds paid to MIMI the following amounts for its
services under the agreement: Ivy Bond Fund -- $102,160, $95,017
and $100,392, respectively; Ivy US Emerging Growth Fund --
$45,324, $89,558 and $96,822, respectively; Ivy Growth Fund --
$103,945, $131,740 and $104,714, respectively; and Ivy Growth
with Income Fund -- $60,915, $87,182 and $92,373,
respectively.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service
Agreement, IMSC, a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, each Fund
pays a monthly fee at an annual rate of $20.00 per open Advisor
Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.58 per account that is closed plus certain out-
of-pocket expenses. Certain broker-dealers that maintain
shareholder accounts with a Fund through an omnibus account
provide transfer agent and other shareholder-related services
that would otherwise be provided by IMSC if the individual
accounts that comprise the omnibus account were opened by their
beneficial owners directly. IMSC pays such broker-dealers a per
account fee for each open account within the omnibus account, or
a fixed rate (e.g., .10%) fee, based on the average daily net
asset value of the omnibus account (or a combination
thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI
provides certain administrative services to each Fund. As
compensation for these services, each Fund pays MIMI a monthly
fee at the annual rate of .10% of the average daily net asset
value of its Advisor Class shares.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public
accountants has been selected as auditors for the Trust. The
audit services performed by Coopers & Lybrand L.L.P., include
audits of the annual financial statements of each of the funds of
the Trust. Other services provided principally relate to filings
with the SEC and the preparation of the funds' tax returns.
Year 2000 Risks. The services provided to the Funds by IMI,
MFC, Northern Cross, MIMI and the Funds' other service providers
are dependent on those service providers' computer systems. Many
computer software and hardware systems in use today cannot
distinguish between the year 2000 and the year 1900 because of
the way dates are encoded and calculated (the "Year 2000
Problem"). The failure to make this distinction could have a
negative implication on handling securities trades, pricing and
account services. IMI, MFC, Northern Cross, MIMI and the Funds'
other service providers are taking steps that each believes are
reasonably designed to address the Year 2000 Problem with respect
to the computer systems that they use. The Funds believe these
steps will be sufficient to avoid any material adverse impact on
the Funds. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the
Funds.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited
number of shares of beneficial interest (no par value per share).
When issued, shares of each class of each Fund are fully paid,
non-assessable, redeemable and fully transferable. No class of
shares of a Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust permits the
Trustees to create separate series or portfolios and to divide
any series or portfolio into one or more classes. The Trustees
have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for Ivy International Fund and Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class
shares for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy US Emerging Growth Fund (formerly Ivy
Emerging Growth Fund until January 15, 1998), Ivy Global Fund,
Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund II, Ivy High Yield Fund (formerly Ivy
International Bond Fund until January 28, 1998), Ivy South
America Fund (formerly Ivy Latin America Strategy Fund until
January 15, 1998), Ivy Developing Nations Fund (formerly Ivy New
Century Fund until January 15, 1998) and Ivy Pan-Europe Fund, as
well as Class I shares for Ivy Bond Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy High Yield Fund and Ivy International Small Companies
Fund.
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of each Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of a Fund are entitled to vote alone on matters that
only affect that Fund. All classes of shares of a Fund will vote
together, except with respect to the distribution plan applicable
to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all
funds of the Trust, but affecting the funds differently, separate
votes by the shareholders of each fund are required. Approval of
an investment advisory agreement and a change in fundamental
policies would be regarded as matters requiring separate voting
by the shareholders of each fund of the Trust. If the Trustees
determine that a matter does not affect the interests of a Fund,
then the shareholders of that Fund will not be entitled to vote
on that matter. Matters that affect the Trust in general, such
as ratification of the selection of independent public
accountants, will be voted upon collectively by the shareholders
of all funds of the Trust.
As used in this SAI and the Prospectus, the phrase "majority
vote of the outstanding shares" of a Fund means the vote of the
lesser of: (1) 67% of the shares of that Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of that Fund (or of the
Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by a Fund, the matter shall have
been effectively acted upon with respect to that Fund if a
majority of the outstanding voting securities of that Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 26(c) of the Act were
applicable.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A shares, except that of the outstanding
Class A shares of Ivy Bond Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 1,098,779.728 shares (37.37%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class B shares, except that of the outstanding
Class B shares of Ivy Growth Fund, IBT (custodian) FBO G.
Pattyson, P.O. Box 11, Terrace Bay, Ontario, Canada POT 2WO,
owned of record 17,745.276 shares (7.33%); and except that of the
outstanding Class B shares of Ivy Growth with Income Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 191,412.628 shares
(10.75%); and except that of the outstanding Class B shares of
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 339,527.965 shares (19.89%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class C shares, except that of the outstanding
Class C shares of Ivy Bond Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 629,396.958 shares (73.32%); and except that of
the outstanding Class C shares of Ivy Growth Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 4,134.133 shares
(38.54%), Ramond James & Assoc.Inc., FBO Rafter L. Cattle Co.,
HRC 77 #441, Uvalde, TX 78801, owned of record 2,739.579 shares
(25.54%), Painewebber, P.O. Box 3321, Weehawken, NJ 07087-8154
owned of record 1,375.981 shares (12.82%), Martin S Sawyer & Ruth
C Sawyer, 2301 Freemont Drive, Sarasota, FL 34238-3016, owned of
record 563.386 shares (5.25%), and Southwest Securities Inc.,
P.O. Box 509002, Dallas, TX 75250, owned of record 542.000 shares
(5.05%); and except that of the outstanding Class C shares of Ivy
Growth with Income Fund, Gaston R Levy, 50 Woodfall Road ,
Belmont, MA 02178, owned of record 25,996.360 shares (7.38%), Ann
Marie Chenoweth, 7 Myers Farm Rd., Hingham, MA 02043, owned of
record 25,298.237 shares (7.18%), Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 21,254.724 shares (6.04%), and S Joseph Hoffman,
28 Hidden Way, Andover, MA 01810, owned of record 20,481.233
shares (5.82%); and except that of the outstanding Class C shares
of Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246,
owned of record 101,388.092 shares (29.79%).
To the knowledge of the Trust, as of April 17, 1998,
no shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Advisor Class shares, except that of the
outstanding Advisor Class shares of Ivy Bond Fund, Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303-9998, owned of record 25,904.301 shares
(81.09%), and Charles Schwab & Co. Inc., 101 Montgomery Street,
San Francisco, CA 94104, owned of record 1,905.016 shares
(5.96%).
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of a Fund held personally liable
for the obligations of that Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
NET ASSET VALUE
The net asset value per share of a Fund is computed by
dividing the value of the Fund's aggregate net assets (i.e., its
total assets less its liabilities) by the number of the Fund's
shares outstanding. For purposes of determining a Fund's
aggregate net assets, receivables are valued at their realizable
amounts. A Fund's liabilities, if not identifiable as belonging
to a particular class of the Fund, are allocated among the Fund's
several classes based on their relative net asset size.
Liabilities attributable to a particular class are charged to
that class directly. The total liabilities for a class are then
deducted from the class's proportionate interest in the Fund's
assets, and the resulting amount is divided by the number of
shares of the class outstanding to produce its net asset value
per share.
A security listed or traded on a recognized stock exchange
or The Nasdaq Stock Market Inc. ("Nasdaq") is valued at the
security's last sale price on the exchange on which the security
is principally traded. If no sale is reported at that time, the
average between the current bid and asked price is used. The
value of a foreign security is determined in its national
currency as of the normal close of trading on the foreign
exchange on which it is traded or as of the close of regular
trading on the Exchange, if that is earlier, and that value is
then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined. All other
securities for which OTC market quotations are readily available
are valued at the average between the current bid and asked
price.
Debt securities normally are valued on the basis of quotes
obtained from brokers and dealers (or pricing services that take
into account appropriate valuation factors). Interest is accrued
daily. Money market instruments are valued at amortized cost,
which the Board believes approximates market value. Options are
valued at the last sale price on the exchange on which they
principally are traded, if available, and otherwise are valued at
the last offering price, in the case of written options, and the
last bid price, in the case of purchased options. Exchange
listed and widely-traded OTC futures (and options thereon) are
valued at the most recent settlement price. Securities and other
assets for which market prices are not readily available are
valued at fair value as determined by IMI and approved by the
Board. Trading in securities on European and Far Eastern
securities exchanges is normally completed before the close of
regular trading on the Exchange. Trading on these foreign
exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of
the national business holidays identified above). If events
materially affecting the value of a Fund's portfolio securities
occur between the time when these foreign exchanges close and the
time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and
approved by the Board.
Portfolio securities are valued (and net asset value per
share is determined) as of the close of regular trading on the
Exchange (normally 4:00 p.m., eastern time) on each day the
Exchange is open for trading. The Exchange and the Trust's
offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On those days when either or both of the
Funds' Custodian or the Exchange close early as a result of a
partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption
requests must be received.
The sale of a Fund's shares will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the Fund's best
interest to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed to have
above average potential for capital appreciation. Common stocks
are disposed of in situations where it is believed that potential
for such appreciation has lessened or that other common stocks
have a greater potential. Therefore, a Fund may purchase and
sell securities without regard to the length of time the security
is to be, or has been, held. A change in securities held by a
Fund is known as "portfolio turnover" and may involve the payment
by that Fund of dealer markup or underwriting commission and
other transaction costs on the sale of securities, as well as on
the reinvestment of the proceeds in other securities. A Fund's
portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the most recently
completed fiscal year by the monthly average of the value of the
portfolio securities owned by the Fund during that year. For
purposes of determining a Fund's portfolio turnover rate, all
securities whose maturities at the time of acquisition were one
year or less are excluded. The annual portfolio turnover rates
for the Funds are provided in the Prospectus under "The Funds'
Financial Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the
value of its net assets, or (iii) for such other periods as the
SEC may by order permit for the protection of shareholders of a
Fund.
Under unusual circumstances, when the Board deems it in
the best interest of a Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part in
securities of that Fund taken at current values. If any such
redemption in kind is to be made, each Fund may make an election
pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of that Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment of less than
$10,000 in a Fund for a period of more than 12 months. All
Advisor Class accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $10,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by a Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require
personal identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions, a
Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of certain tax
rules thought to be applicable with respect to the Funds. It is
merely a summary and is not an exhaustive discussion of all
possible situations or of all potentially applicable taxes.
Accordingly, shareholders and prospective shareholders should
consult a competent tax adviser about the tax consequences to
them of investing in the Funds.
Each Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, each Fund
must, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale
or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing
in such stock, securities or currencies; (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the particular Fund's assets is
represented by cash, U.S. Government securities, the securities
of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the particular
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, each Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
each Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the particular Fund in October, November or
December of the year with a record date in such a month and paid
by that Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar
year the distributions are declared, rather than the calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or
call option is not included in income at the time of receipt. If
the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by a Fund is exercised, thereby requiring the
Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will
be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which a Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by a Fund at the
end of each taxable year (and on certain other dates prescribed
in the Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for Federal income
tax purposes. The straddle rules may affect the character of
gains or losses realized by a Fund. In addition, losses realized
by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in
which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the
consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term
capital gain realized by a Fund, which is taxed as ordinary
income when distributed to shareholders.
A Fund may make one or more of the elections available under
the Code which are applicable to straddles. If a Fund makes any
of the elections, the amount, character and timing of the
recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain options,
futures and forward contracts, gains or losses attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to
its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross
income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which a Fund held the PFIC shares. A Fund
itself will be subject to tax on the portion, if any, of an
excess distribution that is so allocated to prior Fund taxable
years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, a Fund generally
would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If a Fund invests in certain high yield original issue
discount obligations issued by corporations, a portion of the
original issue discount accruing on the obligation may be
eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company
taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated
by the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by a Fund
may be treated as having acquisition discount, or OID in the case
of certain types of debt securities. Generally, a Fund will be
required to include the acquisition discount, or OID, in income
over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections
applicable to debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition
of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by a Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Fund to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the
revised alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by a Fund as capital gain dividends, are taxable to
individual shareholders at a maximum 20% or 28% capital gains
rate (depending on the Fund's holding period for the assets
giving rise to the gain), whether paid in cash or in shares, and
regardless of how long the shareholder has held the Fund's
shares; such distributions are not eligible for the dividends
received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share
received equal to the net asset value of a share of a Fund on the
distribution date. A distribution of an amount in excess of a
Fund's current and accumulated earnings and profits will be
treated by a shareholder as a return of capital which is applied
against and reduces the shareholder's basis in his or her shares.
To the extent that the amount of any such distribution exceeds
the shareholder's basis in his or her shares, the excess will be
treated by the shareholder as gain from a sale or exchange of the
shares. Shareholders will be notified annually as to the U.S.
Federal tax status of distributions and shareholders receiving
distributions in the form of newly issued shares will receive a
report as to the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by a Fund, such
distribution generally will be taxable even though it represents
a return of invested capital. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares,
a shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption
sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder
on the sale of Fund shares held by the shareholder for six-months
or less will be treated for tax purposes as a long-term capital
loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
In some cases, shareholders will not be permitted to take
all or portion of their sales loads into account for purposes of
determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st
day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in a Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by
that country.
If more than 50% of the value of a Fund's total assets at
the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and may elect to "pass-
through" to that Fund's shareholders the amount of foreign income
and similar taxes paid by that Fund. Pursuant to this election,
a shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her pro
rata share of the foreign income and similar taxes paid by a
Fund, and will be entitled either to deduct his or her pro rata
share of foreign income and similar taxes in computing his or her
taxable income or to use it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be notified
within 60 days after the close of a Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that
year and, if so, such notification will designate (1) the
shareholder's portion of the foreign taxes paid to each such
country and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, except in the case of certain electing
individual taxpayers who have limited creditable foreign taxes
and no foreign source income other than passive investment-type
income, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to
his or her total foreign source taxable income. For this
purpose, if a Fund makes the election described in the preceding
paragraph, the source of that Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of
securities generally will be treated as derived from U.S. sources
and section 988 gains will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, including
foreign source passive income received from a Fund. In addition,
the foreign tax credit may offset only 90% of the revised
alternative minimum tax imposed on corporations and individuals.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
of the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross
proceeds from the redemption of the particular Fund's shares,
except in the case of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the
case of non-exempt shareholders if (1) the shareholder fails to
furnish a Fund with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the
IRS notifies the shareholder or the particular Fund that the
shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to
certify that he or she is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions
or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to a Fund or shareholders. Shareholders
are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of the
Funds may be compared, in reports and promotional literature, to:
(i) the S&P 500 Index, the Dow Jones Industrial Average ("DJIA"),
or other unmanaged indices so that investors may compare each
Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research
firm that ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return
from an investment in a Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended
to indicated future performance.
In addition, the Trust may, from time to time, include the
yield (with respect to Ivy Bond Fund only), the average annual
total return and the cumulative total return of shares of a Fund
in advertisements, promotional literature or reports to
shareholders or prospective investors.
YIELD. Quotations of yield for a specific Class of shares
of a Fund will be based on all investment income attributable to
that Class earned during a particular 30-day (or one month)
period (including dividends and interest), less expenses
attributable to that Class accrued during the period ("net
investment income"), and will be computed by dividing the net
investment income per share of that Class earned during the
period by the maximum offering price per share (in the case of
Class A shares) or the net asset value per share (in the case of
Class B and Class C shares) on the last day of the period,
according to the following formula:
YIELD = 2[({(a-b)/cd} + 1){superscript 6}-1]
Where: a = dividends and interest earned during the
period attributable to a specific Class
of shares,
b = expenses accrued for the period
attributable to that Class (net of
reimbursements),
c = the average daily number of shares of
that Class outstanding during the period
that were entitled to receive dividends,
and
d = the maximum offering price per share (in
the case of Class A shares) or the net
asset value per share (in the case of
Class B shares, Class C shares and Class
I shares) on the last day of the period.
The yield for Class A, Class B and Class C shares of Ivy
Bond Fund for the 30-day period ended December 31, 1997 was
6.53%, 6.13%, and 6.14%, respectively. As of
December 31, 1997, there were no outstanding Class I shares of
Ivy Bond Fund.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized
average annual total return ("Standardized Return") for a
specific Class of shares of a Fund will be expressed in terms of
the average annual compounded rate of return that would cause a
hypothetical investment in that Class of a Fund made on the first
day of a designated period to equal the ending redeemable value
("ERV") of such hypothetical investment on the last day of the
designated period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to
purchase shares of a specific Class
T = the average annual total return of shares of
that Class
n = the number of years
ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period.
For purposes of the above computation for a Fund, it is
assumed that all dividends and capital gains distributions made
by a Fund are reinvested at net asset value in additional Advisor
Class shares during the designated period. Standardized Return
quotations for the Funds do not take into account any required
payments for federal or state income taxes. Standardized Return
quotations are determined to the nearest 1/100 of 1%.
A Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective
investors total return data that are not calculated according to
the formula set forth above ("Non-Standardized Return").
CUMULATIVE TOTAL RETURN. Cumulative total return is the
cumulative rate of return on a hypothetical initial investment of
$1,000 in a specific Class of shares of a Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of a Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
the Fund shares. Cumulative total return is calculated by
computing the cumulative rates of return of a hypothetical
investment in a specific Class of shares of a Fund over such
periods, according to the following formula (cumulative total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000
to purchase shares of a specific Class
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for a Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of the Fund. These
factors and possible differences in the methods used in
calculating performance quotations should be considered when
comparing performance information regarding a Fund's shares with
information published for other investment companies and other
investment vehicles. Performance quotations should also be
considered relative to changes in the value of a Fund's shares
and the risks associated with a Fund's investment objectives and
policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can
be no assurance that any historical performance quotation will
continue in the future.
The Funds may also cite endorsements or use for comparison
their performance rankings and listings reported in such
newspapers or business or consumer publications as, among others:
AAII Journal, Barron's, Boston Business Journal, Boston Globe,
Boston Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31,
1997, Statement of Assets and Liabilities as of December 31,
1997, Statement of Operations for the fiscal year ended December
31, 1997, Statement of Changes in Net Assets for the fiscal years
ended December 31, 1996, and December 31, 1997, Financial
Highlights, Notes to Financial Statements, and Report of
Independent Accountants are included in each Fund's December 31,
1997 Annual Report to shareholders, which are incorporated by
reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
AND COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue. Issuers rated Prime-2 are deemed to have a strong ability
for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
IVY ASIA PACIFIC FUND
IVY CANADA FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS FUND
IVY GLOBAL FUND
IVY GLOBAL NATURAL RESOURCES FUND
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY INTERNATIONAL FUND
IVY INTERNATIONAL FUND II
IVY INTERNATIONAL SMALL COMPANIES FUND
IVY PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy South America Fund) is
diversified. This Statement of Additional Information ("SAI")
describes the Class A, B, C and I shares of the twelve portfolios
listed above (collectively, the "Funds," and each, a "Fund").
The other six portfolios of the Trust are described in separate
SAIs.
This SAI is not a prospectus and should be read in
conjunction with the Prospectus for the Funds dated April 30,
1998 (the "Prospectus"), which may be obtained upon request and
without charge from the Trust at the Distributor's address and
telephone number printed below. The Funds (other than Ivy
International Fund) also offer Advisor Class shares, which are
described in a separate prospectus and SAI that may also be
obtained without charge from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(Ivy Canada Fund and Ivy Global Natural Resources Fund only)
Mackenzie Financial Corporation
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone (416) 922-5322
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 11
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 11
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 11
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 11
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 12
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . 12
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 12
U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . 13
INVESTMENT-GRADE DEBT SECURITIES . . . . . . . . . . 13
LOW-RATED DEBT SECURITIES. . . . . . . . . . . . . . 13
ZERO COUPON BONDS. . . . . . . . . . . . . . . . . . 15
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED"
SECURITIES . . . . . . . . . . . . . . . . . . . . . 15
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 15
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 16
DEPOSITORY RECEIPTS. . . . . . . . . . . . . . . . . 17
EMERGING MARKETS . . . . . . . . . . . . . . . . . . 17
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . 18
CONCENTRATION RISKS . . . . . . . . . . . . . . . . . . . 18
THE ASIA-PACIFIC REGION. . . . . . . . . . . . . . . 18
THE CHINA REGION . . . . . . . . . . . . . . . . . . 19
CANADIAN SECURITIES. . . . . . . . . . . . . . . . . 19
NATURAL RESOURCES AND PHYSICAL COMMODITIES . . . . . 20
SOUTH AMERICAN SECURITIES. . . . . . . . . . . . . . 21
ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . 23
REAL ESTATE INVESTMENT TRUSTS (REITS) . . . . . . . . . . 23
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 24
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . 24
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 24
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 24
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 24
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 25
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 26
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 26
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 27
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . 27
IN GENERAL.. . . . . . . . . . . . . . . . . . . . . 27
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS.. . . . . . . . . . . . . . . . . . . . 28
RISKS ASSOCIATED WITH FUTURES AND RELATED
OPTIONS.. . . . . . . . . . . . . . . . . . . . 29
STOCK INDEX FUTURES CONTRACTS . . . . . . . . . . . . . . 30
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 30
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . . 31
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 31
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 36
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 37
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 38
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 38
INITIAL SALES CHARGE SHARES. . . . . . . . . . . . . 38
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A . . 38
CLASS B. . . . . . . . . . . . . . . . . . . . . . . 38
CLASS C. . . . . . . . . . . . . . . . . . . . . . . 39
CLASS I. . . . . . . . . . . . . . . . . . . . . . . 39
ALL CLASSES. . . . . . . . . . . . . . . . . . . . . 39
LETTER OF INTENT. . . . . . . . . . . . . . . . . . . . . 40
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 40
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 41
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 42
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 43
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 43
REINVESTMENT PRIVILEGE. . . . . . . . . . . . . . . . . . 44
RIGHTS OF ACCUMULATION. . . . . . . . . . . . . . . . . . 44
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 44
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 45
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 46
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 48
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 52
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 53
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 55
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 55
SUBADVISORY CONTRACT - IVY INTERNATIONAL FUND . . . 58
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 58
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 61
RULE 12B-1 DISTRIBUTION PLANS. . . . . . . . . . . . 61
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 68
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 68
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 69
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 69
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 69
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 70
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 74
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 75
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 75
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . . . . . . 76
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 77
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. . 78
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 79
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 79
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 80
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 80
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 81
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 82
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 82
AVERAGE ANNUAL TOTAL RETURN . . . . . . . . . . . . . . . 82
CUMULATIVE TOTAL RETURN . . . . . . . . . . . . . . . . .100
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . .108
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . .109
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . .110
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND CHINA REGION COUNTRIES. . . . . . . . . . . .113
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objectives and Policies" and "Risk Factors and
Investment Techniques." The different types of securities and
investment techniques used by the Funds involve varying degrees
of risk, and are described more fully under "Risk Factors,"
below.
IVY ASIA PACIFIC FUND: The Fund's principal investment
objective is long-term growth. Consideration of current income is
secondary to this principal objective. Under normal circumstances
the Fund invests at least 65% of its total assets in securities
issued in Asia-Pacific countries, which for purposes of this
Prospectus are defined to include China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri
Lanka, South Korea, Taiwan, Thailand and Vietnam. Securities of
Asia-Pacific issuers include: (a) securities of companies
organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific
region; (b) securities that are issued or guaranteed by the
government of an Asia-Pacific country, its agencies or
instrumentalities, political subdivisions or the country's
central bank; (c) securities of a company, wherever organized,
where at least 50% of the company's non-current assets,
capitalization, gross revenue or profit in any one of the two
most recent fiscal years represents (directly or indirectly
through subsidiaries) assets or activities located in the
Asia-Pacific region; and (d) any of the preceding types of
securities in the form of depository shares.
The Fund may participate in markets throughout the
Asia-Pacific region, and it is expected that the Fund will be
invested at all times in at least three Asia-Pacific countries.
The Fund does not expect to concentrate its investments in any
particular industry. See Appendix C to the SAI for further
information about the economic characteristics of certain
Asia-Pacific countries.
The Fund may invest up to 35% of its assets in
investment-grade debt securities of government or corporate
issuers in emerging market countries, equity securities and
investment grade debt securities of issuers in developed
countries (including the United States), warrants, and cash or
cash equivalents, such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For temporary
defensive purposes, the Fund may invest without limit in such
instruments. The Fund may also invest up to 5% of its net assets
in zero coupon bonds, and in debt securities rated Ba or below by
Moody's Investor Service, Inc. ("Moody's") or BB or below by
Standard and Poor's Corporation ("S&P"), or if unrated, are
considered by IMI to be of comparable quality (commonly referred
to as "high yield" or "junk" bonds). The Fund will not invest in
debt securities rated less than C by either Moody's or S&P. As of
December 31, 1997, the Fund held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies that invest in securities issued in
Asia-Pacific countries, and up to 15% of its net assets in
illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets are subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY CANADA FUND: Ivy Canada Fund seeks long-term capital
appreciation by investing primarily in equity securities of
Canadian companies. Canada is one of the world's leading
industrial countries and a major exporter of agricultural
products. The country is rich in natural resources such as zinc,
uranium, nickel, gold, silver, aluminum, iron and copper, and
forest covers over 44% of land areas, making Canada a leading
world producer of newsprint. Canada is also a major producer of
hydroelectricity, oil and gas.
As a fundamental policy, the Fund normally invests at least
65% of its total assets in Canadian equity securities (i.e.,
common and preferred stock, securities convertible into common
stock and common stock purchase warrants) listed on Canadian
stock exchanges or traded over-the-counter in Canada. Canadian
issuers are companies (i) organized under the laws of Canada,
(ii) for which the principal securities trading market is in
Canada, (iii) which derive at least 50% of their revenues or
profits from goods produced or sold, investments made or services
performed in Canada, or (iv) which have at least 50% of their
assets situated in Canada. The balance of the Fund's assets
ordinarily are invested in (i) bills and bonds of the Canadian
Government and the governments of the provinces or municipalities
of Canada, (ii) high quality notes and debentures of Canadian
companies (i.e., those rated Aaa or Aa by Moody's or AAA or AA by
S&P, or if unrated, judged to be of comparable quality by
Mackenzie Financial Corporation ("MFC"), the Fund's Advisor),
(iii) foreign securities (including sponsored or unsponsored
American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs") and Global
Depository Shares ("GDSs")), (iv) U.S. Government securities,
(v) equity securities and investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or
if unrated, are considered by MFC to be of comparable quality) of
U.S. companies, and (vi) zero coupon bonds that meet these credit
quality standards.
The Fund may purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid
securities. The Fund may not, as a matter of fundamental policy,
invest more than 5% of its total assets in restricted securities.
For temporary defensive purposes, the Fund may invest
without limit in U.S. or Canadian dollar-denominated money market
securities issued by entities organized in the U.S. or Canada,
such as (i) obligations issued or guaranteed by the Canadian
Government or the governments of the provinces or municipalities
of Canada (or their agencies or instrumentalities), (ii) finance
company and corporate commercial paper (and other short-term
corporate obligations rated Prime-1 by Moody's or A or better by
S&P, or if unrated, considered by MFC to be of comparable
quality), (iii) obligations of banks (i.e., certificates of
deposit, time deposits and bankers' acceptances) considered
creditworthy by MFC under guidelines approved by the Trustees,
and (iv) repurchase agreements with broker-dealers and banks. For
temporary or emergency purposes, the Fund may also borrow up to
10% of the value of its total assets from banks.
IVY CHINA REGION FUND: Ivy China Region Fund's principal
investment objective is long-term capital growth. Consideration
of current income is secondary to this principal objective. The
Fund seeks to meet its objective primarily by investing in the
equity securities of companies that are expected to benefit from
the economic development and growth of China, Hong Kong and
Taiwan. A significant percentage of the Fund's assets may also be
invested in the securities markets of South Korea, Singapore,
Malaysia, Thailand, Indonesia and the Philippines (collectively,
with China, Hong Kong and Taiwan, the "China Region").
The Fund normally invests at least 65% of its total assets
in "Greater China growth companies," defined as companies
(a) that are organized in or for which the principal securities
trading markets are the China Region; (b) that have at least 50%
of their assets in one or more China Region countries or derive
at least 50% of their gross sales revenues or profits from
providing goods or services to or from within one or more China
Region countries; or (c) that have at least 35% of their assets
in China, Hong Kong or Taiwan, derive at least 35% of their gross
sales revenues or profits from providing goods or services to or
from within these three countries, or have significant
manufacturing or other operations in these countries. IMI's
determination as to whether a company qualifies as a Greater
China growth company is based primarily on information contained
in financial statements, reports, analyses and other pertinent
information (some of which may be obtained directly from the
company). The Fund may invest 25% or more of its total assets in
the securities of issuers located in any one China Region
country, and currently expects to invest more than 50% of its
total assets in Hong Kong. See Appendix B to the SAI for further
information about the economic characteristics of certain China
Region countries.
The balance of the Fund's assets ordinarily are invested in
(i) certain investment-grade debt securities and (ii) the equity
securities of "China Region associated companies," which are
companies that do not meet the definition of a Greater China
growth company, but whose current or expected performance, based
on certain identified factors (such as the growth trends in the
location of a company's assets and the sources of its revenues
and profits), is judged by IMI to be strongly associated with the
China Region. The investment-grade debt securities in which the
Fund may invest include (a) obligations of the U.S. Government or
its agencies or instrumentalities, (b) obligations of U.S. banks
and other banks organized and existing under the laws of Hong
Kong, Taiwan or countries that are members of the Organization
for Economic Cooperation and Development ("OECD"),
(c) obligations denominated in any currency issued by
international development institutions and Hong Kong, Taiwan and
OECD member governments and their agencies and instrumentalities,
and (d) corporate bonds rated Baa or higher by Moody's or BBB or
higher by S&P (or if unrated, are considered by IMI to be of
comparable quality), as well as repurchase agreements with
respect to any of the foregoing instruments. The Fund may also
invest in zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt
securities rated Ba or below by Moody's or BB or below by S&P,
or, if unrated, considered by IMI to be of comparable quality
(commonly referred to as "high yield" or "junk" bonds). The Fund
will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
The Fund may invest in sponsored or unsponsored ADRs, GDRs,
ADSs and GDSs, warrants, and securities issued on a "when-issued"
or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets
in other investment companies, and up to 15% of its net assets in
illiquid securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may reduce its
position in Greater China growth companies and Greater China
associated companies and increase its investment in cash and
liquid debt securities, such as U.S. Government securities, bank
obligations, commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may
also borrow up to 10% of the value of its total assets from
banks.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
IVY DEVELOPING NATIONS FUND: The Fund's principal objective
is long-term growth. Consideration of current income is secondary
to this principal objective. In pursuing its objective, the Fund
invests primarily in the equity securities of companies that IMI
believes will benefit from the economic development and growth of
emerging markets. The Fund considers countries having emerging
markets to be those that (i) are generally considered to be
"developing" or "emerging" by the World Bank and the
International Finance Corporation, or (ii) are classified by the
United Nations (or otherwise regarded by their authorities) as
"emerging." Under normal market conditions, the Fund invests at
least 65% of its total assets in equity securities (including
common and preferred stocks, convertible debt obligations,
warrants, options (subject to the restrictions set forth below),
rights, and sponsored or unsponsored ADRs, GDRs, ADSs and GDSs
that are listed on stock exchanges or traded over-the-counter) of
"Emerging Market growth companies," which are defined as
companies (a) for which the principal securities trading market
is an emerging market (as defined above), (b) that each (alone or
on a consolidated basis) derives 50% or more of its total revenue
either from goods, sales or services in emerging markets, or
(c) that are organized under the laws of (and with a principal
office in) an emerging market country.
The Fund normally invests its assets in the securities of
issuers located in at least three emerging market countries, and
may invest 25% or more of its total assets in the securities of
issuers located in any one country. IMI's determination as to
whether a company qualifies as an Emerging Market growth company
is based primarily on information contained in financial
statements, reports, analyses and other pertinent information
(some of which may be obtained directly from the company).
For purposes of capital appreciation, the Fund may invest up
to 35% of its total assets in (i) debt securities of government
or corporate issuers in emerging market countries, (ii) equity
and debt securities of issuers in developed countries (including
the United States), and (iii) cash or cash equivalents such as
bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary defensive purposes, the Fund may invest
without limit in such instruments. The Fund may also invest in
zero coupon bonds and purchase securities on a "when-issued" or
firm commitment basis.
The Fund will not invest more than 20% of its total assets
in debt securities rated Ba or lower by Moody's or BB or lower by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies, and up to 15% of its net assets in illiquid
securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY GLOBAL FUND: The Fund seeks long-term capital growth
through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation. Any
income realized will be incidental. Under normal conditions, the
Fund will invest at least 65% of its total assets in the common
stock of companies throughout the world, with at least three
different countries (one of which may be the United States)
represented in the Fund's overall portfolio holdings. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, sponsored or unsponsored ADRs, GDRs, ADSs and
GDSs, and investment-grade debt securities (i.e., those rated Baa
or higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero
coupon bonds.
The Fund may invest less than 35% of its net assets in debt
securities rated Ba or below by Moody's or BB or below by S&P, or
if unrated, considered by IMI to be of comparable quality
(commonly referred to as "high yield" or "junk" bonds). The Fund
will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund had 1.05% of
its total assets invested in low-rated debt securities.
The Fund may invest in equity real estate investment trusts,
warrants, and securities issued on a "when-issued" or firm
commitment basis, and may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid
securities. The Fund may not, as a matter of fundamental policy,
invest more than 5% of its total assets in restricted securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may invest without
limit in U.S. Government securities, obligations issued by
domestic or foreign banks (including certificates of deposit,
time deposits and bankers' acceptances), and domestic or foreign
commercial paper (which, if issued by a corporation, must be
rated Prime-1 by Moody's or A-1 by S&P, or if unrated has been
issued by a company that at the time of investment has an
outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock indices,
provided the premium paid for such options does not exceed 10% of
the Fund's net assets. The Fund may also sell covered put options
with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the
Fund's net assets is subject to being purchased upon the exercise
of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of its total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment
objective is long-term growth. Any income realized will be
incidental. Under normal conditions, the Fund invests at least
65% of its total assets in the equity securities of companies
throughout the world that own, explore or develop natural
resources and other basic commodities, or supply goods and
services to such companies. Under this investment policy, at
least three different countries (one of which may be the United
States) will be represented in the Fund's overall portfolio
holdings. "Natural resources" generally include precious metals
(such as gold, silver and platinum), ferrous and nonferrous
metals (such as iron, aluminum and copper), strategic metals
(such as uranium and titanium), coal, oil, natural gases, timber,
undeveloped real property and agricultural commodities. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may
also invest directly in precious metals and other physical
commodities.
MFC believes that certain political and economic changes in
the global environment in recent years have had and will continue
to have a profound effect on global supply and demand of natural
resources, and that rising demand from developing markets and new
sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, MFC will seek
to identify securities of companies that, in MFC's opinion,
appear to be undervalued relative to the value of the companies'
natural resource holdings.
For temporary defensive purposes, the Fund may invest
without limit in cash or cash equivalents, such as bank
obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may
borrow up to one-third of the value of its total assets from
banks, but may not purchase securities at any time during which
the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest up to 10% of its
total assets in other investment companies and up to 15% of its
net assets in illiquid securities.
For hedging purposes only, the Fund may engage in
transactions in (and options on) foreign currency futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's principal
investment objective is long-term capital growth. Any income
realized will be incidental. Under normal conditions, the Fund
will invest at least 65% of its total assets in the common stock
of companies that are expected to benefit from the development,
advancement and use of science and technology. Under this
investment policy, at least three different countries (one of
which may be the United States) will be represented in the Fund's
overall portfolio holdings. Industries likely to be represented
in the Fund's portfolio include computers and peripheral
products, software, electronic components and systems,
telecommunications, media and information services,
pharmaceuticals, hospital supply and medical devices,
biotechnology, environmental services, chemicals and synthetic
materials, and defense and aerospace. The Fund may also invest in
companies that are expected to benefit indirectly from the
commercialization of technological and scientific advances. In
recent years, rapid advances in these industries have stimulated
unprecedented growth. While this is no guarantee of future
performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it may
also invest in preferred stock, securities convertible into
common stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs
and investment-grade debt securities (i.e., those rated Baa or
higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero
coupon bonds. The Fund may also invest up to 5% of its net assets
in debt securities that are rated Ba or below by Moody's or BB or
below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). The Fund will not invest in debt securities rated
less than C by either Moody's or S&P. As of December 31, 1997,
the Fund held no low-rated debt securities.
The Fund may invest in warrants, purchase securities on a
"when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies and (ii) up to 15% of
its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may invest without
limit in U.S. Government securities, obligations issued by
domestic or foreign banks (including certificates of deposit,
time deposits and bankers' acceptances), and domestic or foreign
commercial paper (which, if issued by a corporation, must be
rated Prime-1 by Moody's or A-1 by S&P, or if unrated has been
issued by a company that at the time of investment has an
outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock indices
and on individual securities, provided the premium paid for such
options does not exceed 10% of the value of the Fund's net
assets. The Fund may also sell covered put options with respect
to up to 50% of the value of its net assets, and may write
covered call options so long as not more than 20% of the Fund's
net assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of the value of its total
assets.
IVY INTERNATIONAL FUND II: The Fund's principal objective
is long-term capital growth primarily through investment in
equity securities. Consideration of current income is secondary
to this principal objective. It is anticipated that at least 65%
of the Fund's total assets will be invested in common stocks (and
securities convertible into common stocks) principally traded in
European, Pacific Basin and Latin American markets. Under this
investment policy, at least three different countries (other than
the United States) will be represented in the Fund's overall
portfolio holdings. For temporary defensive purposes, the Fund
may also invest in equity securities principally traded in
U.S. markets. IMI, the Fund's investment manager, invests the
Fund's assets in a variety of economic sectors, industry segments
and individual securities in order to reduce the effects of price
volatility in any one area and to enable shareholders to
participate in markets that do not necessarily move in concert
with U.S. markets. IMI seeks to identify rapidly expanding
foreign economies, and then searches out growing industries and
corporations, focusing on companies with established records.
Individual securities are selected based on value indicators,
such as a low price-earnings ratio, and are reviewed for
fundamental financial strength. Companies in which investments
are made will generally have at least $1 billion in
capitalization and a solid history of operations.
When economic or market conditions warrants, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities (i.e., those rated Baa or higher
by Moody's or BBB or higher by S&P, or if unrated, considered by
IMI to be of comparable quality), preferred stocks, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or cash or cash
equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements. For temporary or emergency
purposes, the Fund may borrow up to 10% of the value of its total
assets from banks. The Fund may also purchase securities on a
"when-issued" or firm commitment basis, and may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest up to 10% of its
total assets in other investment companies and up to 15% of its
net assets in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY INTERNATIONAL FUND: Sales of shares of this Fund to new
investors have been suspended. See "How to Buy Shares."
The Fund's principal objective is long-term capital growth
primarily through investment in equity securities. Consideration
of current income is secondary to this principal objective. It is
anticipated that at least 65% of the Fund's total assets will be
invested in common stocks (and securities convertible into common
stocks) principally traded in European, Pacific Basin and Latin
American markets. Under this investment policy, at least three
different countries (other than the United States) will be
represented in the Fund's overall portfolio holdings. For
temporary defensive purposes, the Fund may also invest in equity
securities principally traded in U.S. markets.
The Fund's subadviser, Northern Cross Investments Limited
("Northern Cross"), invests the Fund's assets in a variety of
economic sectors, industry segments and individual securities to
reduce the effects of price volatility in any one area and to
enable shareholders to participate in markets that do not
necessarily move in concert with U.S. markets. Northern Cross
seeks to identify rapidly expanding foreign economies, and then
searches out growing industries and corporations, focusing on
companies with established records. Individual securities are
selected based on value indicators, such as a low price-earnings
ratio, and are reviewed for fundamental financial strength.
Companies in which investments are made will generally have at
least $1 billion in capitalization and a solid history of
operations.
When economic or market conditions warrant, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities (i.e., those rated Baa or higher
by Moody's or BBB or higher by S&P, or if unrated, are considered
by Northern Cross to be of comparable quality), preferred stocks,
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or
cash or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For temporary
or emergency purposes, the Fund may borrow up to 10% of the value
of its total assets from banks. The Fund may also purchase
securities on a "when-issued" or firm commitment basis, and may
engage in foreign currency exchange transactions and enter into
forward foreign currency contracts. The Fund may also invest up
to 10% of its total assets in other investment companies and up
to 15% of its net assets in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's
principal investment objective is long-term growth primarily
through investment in foreign equity securities. Consideration of
current income is secondary to this principal objective. Under
normal circumstances the Fund invests at least 65% of its total
assets in common and preferred stocks (and securities convertible
into common stocks) of foreign issuers having total market
capitalization of less than $1 billion. Under this investment
policy, at least three different countries (other than the United
States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in the United
States. The Fund will invest its assets in a variety of economic
sectors, industry segments and individual securities in order to
reduce the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily
move in concert with the U.S. market. The factors that IMI
considers in determining the appropriate distribution of
investments among various countries and regions include prospects
for relative economic growth, expected levels of inflation,
government policies influencing business conditions and the
outlook for currency relationships.
In selecting the Fund's investments, IMI will seek to
identify securities that are attractively priced relative to
their intrinsic value. The intrinsic value of a particular
security is analyzed by reference to characteristics such as
relative price-earnings ratio, dividend yield and other relevant
factors (such as applicable financial, tax, social and political
conditions).
When economic or market conditions warrant, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities, zero coupon bonds, preferred
stocks, warrants, or cash or cash equivalents such as bank
obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. The Fund may also invest up to 5% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment
objective is long-term capital growth. Consideration of current
income is secondary to this principal objective. The Fund seeks
to achieve its investment objective by investing primarily in the
equity securities of companies domiciled or otherwise doing
business (as described below) in European countries. Under normal
circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of "European companies," which
include any issuer (a) that is organized under the laws of a
European country; (b) that derives 50% or more of its total
revenues from goods produced or sold, investments made or
services performed in Europe; or (c) for which the principal
trading market is in Europe. The Fund may also invest up to 35%
of its total assets in the equity securities of issuers domiciled
outside of Europe. The equity securities in which the Fund may
invest include common stock, preferred stock and common stock
equivalents such as warrants and convertible debt securities. The
Fund may also invest in sponsored or unsponsored ADRs, European
Depository Receipts ("EDRs"), GDRs, ADSs, European Depository
Shares ("EDSs") and GDSs. The Fund does not expect to concentrate
its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt
securities, but will not invest more than 20% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities. The Fund may also purchase securities
on a "when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. In addition, the Fund may invest up to 5% of
its net assets in zero coupon bonds.
For temporary defensive purposes or when IMI believes that
circumstances warrant, the Fund may invest without limit in
U.S. Government securities, investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by
S&P, or if unrated, are considered by IMI to be of comparable
quality), warrants, and cash or cash equivalents such as domestic
or foreign bank obligations (including certificates of deposit,
time deposits and bankers' acceptances), short-term notes,
repurchase agreements, and domestic or foreign commercial paper
(which, if issued by a corporation, must be rated Prime-1 by
Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue
rated Aaa or Aa by Moody's or AAA or AA by S&P).
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may also invest (i) up to 10% of its total
assets in other investment companies, and (ii) up to 15% of its
net assets in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY SOUTH AMERICA FUND: The Fund's principal investment
objective is long-term capital growth. Consideration of current
income is secondary to this principal objective. Under normal
conditions the Fund invests at least 65% of its total assets in
securities issued in South America. Securities of South American
issuers include (a) securities of companies organized under the
laws of a South American country or for which the principal
securities trading market is in South America; (b) securities
that are issued or guaranteed by the government of a South
American country, its agencies or instrumentalities, political
subdivisions or the country's central bank; (c) securities of a
company, wherever organized, where at least 50% of the company's
non-current assets, capitalization, gross revenue or profit in
any one of the two most recent fiscal years represents (directly
or indirectly through subsidiaries) assets or activities located
in South America; or (d) any of the preceding types of securities
in the form of depository shares. The Fund may participate,
however, in markets throughout Latin America, which for purposes
of this Prospectus is defined as Mexico, Central America, South
America and the Spanish-speaking islands of the Caribbean, and it
is expected that the Fund will be invested at all times in at
least three countries. Under present conditions, the Fund expects
to focus its investments in Argentina, Brazil, Chile, Colombia,
Peru and Venezuela, which IMI believes are the most developed
capital markets in South America. The Fund does not expect to
concentrate its investments in any particular industry.
The Fund's equity investments consist of common stock,
preferred stock (either convertible or non-convertible),
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs, and warrants
(any of which may be purchased through rights). The Fund's equity
securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market.
The Fund may invest in debt securities (including zero
coupon bonds) when IMI anticipates that the potential for capital
appreciation from debt securities is likely to equal or exceed
that of equity securities (e.g., a favorable change in relative
foreign exchange rates, interest rate levels or the
creditworthiness of issuers). These include debt securities
issued by South American Governments ("Sovereign Debt"). Most of
the debt securities in which the Fund may invest are not rated,
and those that are rated are expected to be below
investment-grade (i.e., rated Ba or below by Moody's or BB or
below by S&P, or considered by IMI to be of comparable quality),
and are commonly referred to as "high yield" or "junk" bonds. As
of December 31, 1997, the Fund held no low-rated debt securities.
To meet redemptions, or while the Fund is anticipating
investments in South American securities, the Fund may hold cash
or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For temporary
defensive or emergency purposes, the Fund may (i) invest without
limit in such instruments, and (ii) borrow up to one-third of the
value of its total assets from banks (but may not purchase
securities at any time during which the value of the Fund's
outstanding loans exceeds 10% of the value of the Fund's total
assets).
The Fund may purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies, and up to 15% of its net assets in illiquid
securities. The Fund will treat as illiquid any South American
securities that are subject to restrictions on repatriation for
more than seven days, as well as any securities issued in
connection with South American debt conversion programs that are
restricted to remittance of invested capital or profits.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
RISK FACTORS
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, a Fund may invest in time deposits in
banks or savings and loan associations. Time deposits are
generally similar to certificates of deposit, but are
uncertificated. A Fund's investments in certificates of deposit,
time deposits, and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, (ii) U.S. banks which do not meet the $1 billion asset
requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the
"FDIC"), (iii) savings and loan associations which have total
assets in excess of $1 billion and which are members of the FDIC,
and (iv) foreign banks if the obligation is, in IMI's opinion, of
an investment quality comparable to other debt securities which
may be purchased by the particular Fund. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
BORROWING
Borrowing may exaggerate the effect on a Fund's net asset
value of any increase or decrease in the value of the Fund's
portfolio securities. Money borrowed will be subject to interest
costs (which may include commitment fees and/or the cost of
maintaining minimum average balances). Although the principal of
a Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus
increasing exposure to capital risk. All borrowings will be
repaid before any additional investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies,
corporations and finance companies. A Fund may invest in
commercial paper that is rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 by Standard & Poor's Corporation
("S&P") or, if not rated by Moody's or S&P, is issued by
companies having an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES
The convertible securities in which a Fund may invest
include corporate bonds, notes, debentures, preferred stock and
other securities that may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common
stock. Investments in convertible securities can provide income
through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or
exchange features. Because convertible securities can be
converted into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield
than the underlying equity, however, so that the price decline of
a convertible security may sometimes be less substantial than
that of the underlying equity security. The exchange ratio for
any particular convertible security may be adjusted from time to
time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio.
Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both
debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the
market value of convertible securities typically changes as the
market value of the underlying common stock changes, and,
therefore, also tends to follow movements in the general market
for equity securities. When the market price of the underlying
common stock increases, the price of a convertible security tends
to rise as a reflection of the value of the underlying common
stock, although typically not as much as the price of the
underlying common stock. While no securities investments are
without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same
issuer.
As debt securities, convertible securities are investments
that provide for a stream of income. Like all debt securities,
there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their
obligations (see following section). Convertible securities
generally offer lower yields than non-convertible securities of
similar quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
DEBT SECURITIES
IN GENERAL. Investing in debt securities involves both
interest rate and credit risk. Generally, the value of debt
instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt
securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds
with longer maturities generally are more volatile than bonds
with shorter maturities. The market value of debt securities also
varies according to the relative financial condition of the
issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury
(such as Treasury bills, notes, and bonds) and (2) Federal agency
obligations guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, which are mortgage-backed
securities). When such securities are held to maturity, the
payment of principal and interest is unconditionally guaranteed
by the U.S. Government, and thus they are of the highest possible
credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to
fluctuations in interest rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayments tends to
increase, thereby shortening the actual average life of the
security. Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the actual average life
of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates, and may involve significantly greater
price and yield volatility than traditional debt securities.
Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association and Student Loan Marketing Association.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is very
strong and differs from the highest rated issues only to a small
degree). Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective elements may
be lacking (i.e., such bonds lack outstanding investment
characteristics and have some speculative characteristics). A
Fund may invest in debt securities that are given an investment-
grade rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of comparable
quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa
or BBB and comparable unrated securities (commonly referred to as
"high yield" or "junk" bonds) are considered to be predominantly
speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The lower the ratings of
corporate debt securities, the more their risks render them like
equity securities. Such securities carry a high degree of risk
(including the possibility of default or bankruptcy of the
issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be
less liquid) than securities in the higher rating categories.
(See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective
characteristics.)
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issuers may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of a Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of a Fund's investment objectives by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of a Fund to retain
or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, Federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
While IMI may refer to ratings issued by established credit
rating agencies, it is not IMI's policy to rely exclusively on
such ratings, but rather to supplement such ratings with its own
independent and ongoing review of credit quality. A Fund's
achievement of its investment objective may, to the extent of its
investment in low-rated debt securities, be more dependent upon
IMI's credit analysis than would be the case if the Funds were
investing in higher quality bonds. Should the rating of a
portfolio security be downgraded, IMI will determine whether it
is in the affected Fund's best interest to retain or dispose of
the security. However, should any individual bond held by a Fund
be downgraded below a rating of C, IMI currently intends to
dispose of such bond based on then existing market conditions.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations
issued without any requirement for the periodic payment of
interest. Zero coupon bonds are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds. The
potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund
being forced to sell portfolio securities at a time when it might
otherwise choose not to sell these securities and when the Fund
might incur a capital loss on such sales. Because interest on
zero coupon obligations is not distributed to the Fund on a
current basis, but is in effect compounded, the value of such
securities of this type is subject to greater fluctuations in
response to changing interest rates than the value of debt
obligations which distribute income regularly.
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES
New issues of certain debt securities are often offered on a
"when-issued" basis, meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, the Fund
will maintain in a segregated account with its Custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date (usually
less than a year), and typically is individually negotiated and
privately traded by currency traders and their customers. A
forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between the
price at which they are buying and selling various currencies.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, at
the same time, they tend to limit any potential gain which might
result should the value of such currencies increase.
While a Fund may enter into forward contracts to reduce
currency exchange risks, changes in currency exchange rates may
result in poorer overall performance for a Fund than if it had
not engaged in such transactions. Moreover, there may be an
imperfect correlation between a Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by that Fund. An imperfect correlation of
this type may prevent a Fund from achieving the intended hedge or
expose the Fund to the risk of currency exchange loss.
A Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the
contract would obligate the Fund to deliver an amount of currency
in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Further, a Fund
generally will not enter into a forward contract with a term of
greater than one year.
A Fund will hold cash or liquid securities in a segregated
account with its Custodian in an amount equal (on a daily marked-
to-market basis) to the amount of the commitments under these
contracts. At the maturity of a forward contract, a Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an offsetting
contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a
party to the original forward contract.
FOREIGN SECURITIES
A Fund may invest in securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored American Depository
Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs"), Global Depository Shares ("GDSs")
and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in the Funds' domestic investments.
Although each Fund's Advisor intends to invest the Fund's
assets only in nations that are generally considered to have
relatively stable and friendly governments, there is the
possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer currency from a
given country), default on foreign government securities,
political or social instability or diplomatic developments which
could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. Moreover, foreign companies are not generally subject
to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less governmental supervision and
regulation of business and industry practices, stock exchanges,
brokers, and listed companies than in the United States. Foreign
securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign
securities markets of many of the countries in which a Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In addition, a
Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no
return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could
cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to
settlement problems could result either in losses to a Fund
because of subsequent declines in the value of the portfolio
security or, if a Fund has entered into a contract to sell the
security, in possible liability to the purchaser. Fixed
commissions on some foreign securities exchanges are generally
higher than negotiated commissions on U.S. exchanges, although
IMI will endeavor to achieve the most favorable net results on a
Fund's portfolio transactions. It may be more difficult for a
Fund's agents to keep currently informed about corporate actions
such as stock dividends or other matters that may affect the
prices of portfolio securities. Communications between the
United States and foreign countries may be less reliable than
within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate the risks to
a Fund associated with the foregoing considerations through
investment variation and continuous professional management.
DEPOSITORY RECEIPTS. ADRs, GDRs and similar instruments,
the issuance of which is typically administered by a U.S. or
foreign bank or trust company, evidence ownership of underlying
securities issued by a U.S. or foreign corporation. ADRs are
publicly traded on exchanges or over-the-counter ("OTC") in the
United States. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying
securities. As a result, information concerning the issuer may
not be as current or as readily available as in the case of
sponsored depository instruments, and their prices may be more
volatile than if they were sponsored by the issuers of the
underlying securities.
EMERGING MARKETS. Certain Funds could have significant
investments in securities traded in emerging markets. Investors
should recognize that investing in such countries involves
special considerations, in addition to those set forth above,
that are not typically associated with investing in United States
securities and that may affect a Fund's performance favorably or
unfavorably.
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility;
(iii) certain national policies that may restrict a Fund's
investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until
relatively recently in certain Eastern European countries, of a
capital market structure or market-oriented economy; (vii) the
possibility that recent favorable economic developments in
Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of a Fund's investments. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, a Fund could
lose a substantial portion of any investments it has made in the
affected countries. Further, few (if any) accounting standards
exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial in relation to
the actual market values and may be adverse to a Fund's net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of a Fund's assets invested in such
country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to
the custody of a Fund's cash and securities, that Fund's
investment in such countries may be limited or may be required to
be effected through intermediaries. The risk of loss through
governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES. Investment in foreign securities
usually will involve currencies of foreign countries. A Fund may
also temporarily hold funds in bank deposits in foreign
currencies during the completion of investment programs and may
purchase forward foreign currency contracts. Because of these
factors, the value of the assets of a Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions
between various currencies. Although the Funds' Custodian values
each Fund's assets daily in terms of U.S. dollars, the Funds
generally do not convert their holdings of foreign currencies
into U.S. dollars on a daily basis. A Fund will do so from time
to time, however, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. A Fund will conduct its
foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to
purchase or sell foreign currencies.
Because a Fund normally will be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in U.S. markets. A Fund's
share price will reflect the movements of both the different
stock and bond markets in which it is invested (both U.S. and
foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar
against foreign currencies may account for part of a Fund's
investment performance. U.S. and foreign securities markets do
not always move in step with each other, and the total returns
from different markets may vary significantly. In addition,
significant uncertainty surrounds the proposed introduction of
the euro (a common currency for the European Union) in January
1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which
the Funds' assets are denominated may be devalued against the
U.S. dollar, resulting in a loss to the Funds.
CONCENTRATION RISKS
THE ASIA-PACIFIC REGION. Certain Asia-Pacific countries in
which Ivy Asia Pacific Fund is likely to invest are developing
countries, and may be in the initial stages of their
industrialization cycle. The economic structures of developing
countries generally are less diverse and mature than in the
United States, and their political systems may be relatively
unstable. Historically, markets of developing countries have
been more volatile than the markets of developed countries, yet
such markets often have provided higher rates of return to
investors.
Investing in securities of issuers in Asia-Pacific countries
involves certain considerations not typically associated with
investing in securities issued in the United States or in other
developed countries, including (i) restrictions on foreign
investment and on repatriation of capital invested in Asian
countries, (ii) currency fluctuations, (iii) the cost of
converting foreign currency into United States dollars, (iv)
potential price volatility and lesser liquidity of shares traded
on Asia-Pacific securities markets and (v) political and economic
risks, including the risk of nationalization or expropriation of
assets and the risk of war.
Certain Asia-Pacific countries may be more vulnerable to the
ebb and flow of international trade and to trade barriers and
other protectionist or retaliatory measures. Investments in
countries that have recently opened their capital markets and
that appear to have relaxed their central planning requirement,
as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions in foreign
markets in general may be longer than in domestic markets, and
such delays may be of particular concern in developing countries.
For example, the possibility of political upheaval and the
dependence on foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some
Asia-Pacific countries are subject to less regulatory scrutiny
than in the United States. In addition, due to the limited size
of the markets for Asia-Pacific securities, the prices for such
securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
THE CHINA REGION. Investors in Ivy China Region Fund should
be aware that many of the China Region countries in which the
Fund is likely to invest may be subject to a greater degree of
economic, political and social instability than is the case in
the United States or other developed countries. Among the
factors causing this instability are (i) authoritarian
governments or military involvement in political and economic
decision making, (ii) popular unrest associated with demands for
improved political, economic and social conditions, (iii)
internal insurgencies, (iv) hostile relations with neighboring
countries, (v) ethnic, religious and racial disaffection, and
(vi) changes in trading status, any one of which could disrupt
the principal financial markets in which the Ivy China Region
Fund invests and adversely affect the value of its assets.
China Region countries tend to be heavily dependent on
international trade, as a result of which their markets are
highly sensitive to protective trade barriers and the economic
conditions of their principal trading partners (i.e., the United
States, Japan and Western European countries). Protectionist
trade legislation, reduction of foreign investment in China
Region economies and general declines in the international
securities markets could have a significant adverse effect on the
China Region securities markets. In addition, certain China
Region countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated
the assets of private companies. There is a heightened risk in
these countries that such adverse actions might be repeated.
To the extent that any China Region country experiences
rapid increases in its money supply or investment in equity
securities for speculative purposes, the equity securities traded
in such countries may trade at price-earning multiples higher
than those of comparable companies trading on securities markets
in the United States, which may not be sustainable. Finally,
restriction on foreign investment exists to varying degrees in
some China Region countries. Where such restrictions apply,
investments may be limited and may increase the Fund's expenses.
See also "Selected Economic and Market Data for Asia Pacific and
China Region Countries" in Appendix B to this SAI.
CANADIAN SECURITIES. Ivy Canada Fund invests primarily in
Canadian securities. The Canadian securities market is among the
largest in the world. Equity securities are traded primarily on
the country's five independent regional stock exchanges: The
Toronto Stock Exchange ("TSE"), the Montreal Exchange ("ME"), the
Vancouver Stock Exchange ("VSE"), the Alberta Stock Exchange and
the Winnipeg Stock Exchange. The TSE, which is the largest
regional exchange, had a total market capitalization of $1190.8
billion as of November 1996 and its 1,304 listed companies had a
November 1996 trading volume of 2,610,118,602 shares. A small
percentage of Canadian stocks are traded on the unlisted or OTC
market. In contrast, almost all debt securities are traded on
the OTC. Interlisting is common among the Canadian and U.S.
stock exchanges and the OTC markets. In addition, the TSE, the
American Stock Exchange and the Midwest Stock Exchange are
electronically linked to permit the order routing of interlisted
securities on those stock exchanges. The ME and the Boston Stock
Exchange are similarly linked. Ivy Canada Fund invests less than
1% of its assets in securities listed solely on the VSE.
The economy of Canada is strongly influenced by the
activities of companies and industries involved in the production
and processing of natural resources. The companies may include
those involved in the energy industry, industrial materials
(chemicals, base metals, timber and paper) and agricultural
materials (grain cereals). The securities of companies in the
energy industry are subject to changes in value and dividend
yield, which depend, to a large extent, on the price and supply
of energy fuels. Rapid price and supply fluctuations may be
caused by events relating to international politics, energy
conservation and the success of exploration projects. Economic
prospects are changing due to recent government attempts to
reduce restrictions against foreign investment.
Many factors, including social, environmental and economic
conditions, that are not within the control of Canada affect and
could have an adverse impact on the financial condition of
Canada. IMI is unable to predict what effect, if any, such
factors would have on instruments held in a Fund's portfolio.
Beginning in January of 1989 the U.S. - Canada Free Trade
Agreement will be phased in over a period of 10 years. This
agreement will remove tariffs on U.S. technology and Canadian
agricultural products in addition to removing trade barriers
affecting other important sectors of each country's economy.
Additionally, the implementation of the North American Free Trade
Agreement in January 1994 is expected over time to lead to
increased trade and reduced barriers between Canada and the
United States.
Canada is one of the world's leading industrial countries,
as well as a major exporter of agricultural products. Canada is
rich in natural resources such as zinc, uranium, nickel, gold,
silver, aluminum, iron and copper. Forest covers over 44% of
land area, making Canada a leading world producer of newsprint.
Canada is also a major producer of hydroelectricity, oil and
gas. The business activities of companies in the energy field
may include the production, generation, transmission, marketing,
control or measurement of energy or energy fuels.
Canadian securities exchanges are self-regulatory agencies
that are recognized by the securities administrators of the
province in which the exchange is located. The largest, most
active Canadian exchange is the TSE, which is a self-regulated
agency recognized by the Ontario Securities Commission. Canadian
securities regulation differs in certain respects from United
States securities regulation. For example, the amount of
information available concerning companies that have securities
traded on Canadian exchanges and do not have securities traded on
an exchange in the United States is generally less than that
available concerning companies which have securities traded on
United States exchanges. See "Risk Factors and Investment
Techniques" in the Prospectus for a discussion of the risks
associated with investing in the securities of foreign companies.
NATURAL RESOURCES AND PHYSICAL COMMODITIES. Since Ivy
Global Natural Resources Fund normally invests a substantial
portion of its assets in securities of companies engaged in
natural resources activities, the Fund may be subject to greater
risks and market fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in
response to market conditions generally, and will be particularly
sensitive to the markets for those natural resources in which a
particular issuer is involved. The values of natural resources
may also fluctuate directly with respect to real and perceived
inflationary trends and various political developments. In
selecting the Fund's portfolio of investments, MFC will consider
each company's ability to create new products, secure any
necessary regulatory approvals, and generate sufficient customer
demand. A company's failure to perform well in any one of these
areas, however, could cause its stock to decline sharply.
Natural resource industries throughout the world may be
subject to greater political, environmental and other
governmental regulation than many other industries. Changes in
governmental policies and the need for regulatory approvals may
have an adverse effect on the products and services of natural
resources companies. For example, the exploration, development
and distribution of coal, oil and gas in the United States are
subject to significant Federal and state regulation, which may
affect rates of return on such investments and the kinds of
services that may be offered to companies in those industries.
In addition, many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. Such regulations may also hamper
the development of new technologies. The direction, type or
effect of any future regulations affecting natural resource
industries are virtually impossible to predict.
Ivy Global Natural Resources Fund's investments in precious
metals (such as gold) and other physical commodities are
considered speculative and subject to special risk
considerations, including substantial price fluctuations over
short periods of time. On the other hand, investments in
precious metals coins or bullion could help to moderate
fluctuations in the value of the Fund's portfolio, since the
prices of precious metals have at times tended not to fluctuate
as widely as shares of issuers engaged in the mining of precious
metals. Because precious metals and other commodities do not
generate investment income, however, the return on such
investments will be derived solely from the appreciation and
depreciation on such investments. The Fund may also incur
storage and other costs relating to its investments in precious
metals and other commodities, which may, under certain
circumstances, exceed custodial and brokerage costs associated
with investments in other types of securities. When the Fund
purchases a precious metal, MFC currently intends that it will
only be in a form that is readily marketable. Under current U.S.
tax law, the Ivy Global Natural Resources Fund may not receive
more than 10% of its yearly income from gains resulting from
selling precious metals or any other physical commodity.
Accordingly, the Fund may be required to hold its precious metals
or sell them at a loss, or to sell its portfolio securities at a
gain, when for investment reasons it would not otherwise do so.
SOUTH AMERICAN SECURITIES. Investors in Ivy South America
Fund should be aware that investing in the securities of South
American issuers may entail risks relating to the potential
political and economic instability of certain South American
countries and the risks of expropriation, nationalization,
confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event
of expropriation, nationalization or other confiscation by any
country, a Fund could lose its entire investment in any such
country.
The securities markets of South American countries are
substantially smaller, less developed, less liquid and more
volatile than the major securities markets in the U.S. Disclosure
and regulatory standards are in many respects less stringent than
U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of
investors in such markets.
The limited size of many South American securities markets
and limited trading volume in the securities of South American
issuers compared to volume of trading in the securities of U.S.
issuers could cause prices to be erratic for reasons apart from
factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether
or not based on in-depth fundamental analysis, may decrease the
value and liquidity of portfolio securities.
Ivy South America Fund invests in securities denominated in
currencies of South American countries. Accordingly, changes in
the value of these currencies against the U.S. dollar will result
in corresponding changes in the U.S. dollar value of the Fund's
assets denominated in those currencies.
Some South American countries also may have managed
currencies, which are not free floating against the U.S. dollar.
In addition, there is risk that certain South American countries
may restrict the free conversion of their currencies into other
countries. Further, certain South American currencies may not be
internationally traded. Certain of these currencies have
experienced a steep devaluation relative to the U.S. dollar. Any
devaluations in the currencies in which a Fund's portfolio
securities are denominated may have a detrimental impact on that
Fund's net asset value.
The economies of individual South American countries may
differ favorably or unfavorably from the U.S. economy in such
respects as the rate of growth of gross domestic product, the
rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. Certain South
American countries have experienced high levels of inflation
which can have a debilitating effect on the economy.
Furthermore, certain South American countries may impose
withholding taxes on dividends payable to a Fund at a higher rate
than those imposed by other foreign countries. This may reduce
the Fund's investment income available for distribution to
shareholders.
Certain South American countries such as Argentina, Brazil
and Mexico are among the world's largest debtors to commercial
banks and foreign governments. At times, certain South American
countries have declared moratoria on the payment of principal
and/or interest on outstanding debt. Investment in sovereign
debt can involve a high degree of risk. The governmental entity
that controls the repayment of sovereign debt may not be able or
willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's
willingness or ability to repay principal and interest due in a
timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the
economy as a whole, the governmental entity's policy towards the
International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental
entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to
reduce principal and interest arrearages on their debt. The
commitment on the part of these governments, agencies and others
to make such disbursements may be conditioned on a governmental
entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may
result in the cancellation of such third parties' commitments to
lend funds to the governmental entity, which may further impair
such debtor's ability or willingness to service its debts in a
timely manner. Consequently, governmental entities may default
on their sovereign debt.
Holders of sovereign debt, may be requested to participate
in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by
which defaulted sovereign debt may be collected in whole or in
part.
Governments of many South American countries have exercised
and continue to exercise substantial influence over many aspects
of the private sector through the ownership or control of many
companies, including some of the largest in those countries. As
a result, government actions in the future could have a
significant effect on economic conditions which may adversely
affect prices of certain portfolio securities. Expropriation,
confiscatory taxation, nationalization, political, economic or
social instability or other similar developments, such as
military coups, have occurred in the past and could also
adversely affect a Fund's investments in this region.
Changes in political leadership, the implementation of
market oriented economic policies, such as privatization, trade
reform and fiscal and monetary reform are among the recent steps
taken to renew economic growth. External debt is being
restructured and flight capital (domestic capital that has left
home country) has begun to return. Inflation control efforts
have also been implemented. South American equity markets can
be extremely volatile and in the past have shown little
correlation with the U.S. market. Currencies are typically weak,
but most are now relatively free floating, and it is not unusual
for the currencies to undergo wide fluctuations in value over
short periods of time due to changes in the market.
ILLIQUID SECURITIES
A Fund may purchase securities other than in the open
market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities" or "not readily marketable" (i.e., they cannot be
sold to the public without registration under the Securities Act
of 1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they
are subject to other legal or contractual delays in or
restrictions on resale). This investment practice, therefore,
could have the effect of increasing the level of illiquidity of a
Fund. It is a Fund's policy that illiquid securities (including
repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's
Board of Trustees has approved guidelines for use by IMI in
determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i)
only to qualified institutional buyers; (ii) in a privately
negotiated transaction to a limited number of purchasers; (iii)
in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for
which a registration statement is in effect under the 1933 Act.
Issuers of restricted securities may not be subject to the
disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded. If
adverse market conditions were to develop during the period
between a Fund's decision to sell a restricted or illiquid
security and the point at which the Fund is permitted or able to
sell such security, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted
securities, a Fund may be required to bear all or part of the
registration expenses. A Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, in such event, the Fund
may be liable to purchasers of such securities if the
registration statement prepared by the issuer is materially
inaccurate or misleading.
Since it is not possible to predict with assurance that the
market for securities eligible for resale under Rule 144A will
continue to be liquid, IMI will monitor such restricted
securities subject to the supervision of the Board of Trustees.
Among the factors IMI may consider in reaching liquidity
decisions relating to Rule 144A securities are: (1) the
frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security
and the nature of the market for the security (i.e., the time
needed to dispose of the security, the method of soliciting
offers, and the mechanics of the transfer).
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests
in real estate mortgages or equities for the benefit of its
investors. REITs are dependent upon management skill, may not be
diversified and are subject to the risks of financing projects.
Such entities are also subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended (the "Code"), and to
maintain exemption from the 1940 Act. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his
or her proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys
a money market instrument and obtains a simultaneous commitment
from the seller to repurchase the instrument at a specified time
and at an agreed-upon yield. Under guidelines approved by the
Board, a Fund is permitted to enter into repurchase agreements
only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other
securities that IMI has approved for use as collateral for
repurchase agreements and the collateral must be marked-to-market
daily. A Fund will enter into repurchase agreements only with
banks and broker-dealers deemed to be creditworthy by its Adviser
under the above-referenced guidelines. In the unlikely event of
failure of the executing bank or broker-dealer, a Fund could
experience some delay in obtaining direct ownership of the
underlying collateral and might incur a loss if the value of the
security should decline, as well as costs in disposing of the
security.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of small or new companies may be subject to more
abrupt or erratic market movements because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
WARRANTS
The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in a tandem with the prices of
the underlying securities, and are, therefore, considered
speculative investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a warrant held by
a Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. A Fund may engage in transactions in options on
securities and stock indices in accordance with its stated
investment objective and policies. A Fund may also purchase put
options on securities and may purchase and sell (write) put and
call options on stock indices. Options on securities and stock
indices purchased or written by a Fund will be limited to options
traded on national securities exchanges, boards of trade or
similar entities, or in the OTC markets.
A call option is a short-term contract (having a duration of
less than one year) pursuant to which the purchaser, in return
for the premium paid, has the right to buy the security
underlying the option at the specified exercise price at any time
during the term of the option. The writer of the call option,
who receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment of
the exercise price. A put option is a similar contract pursuant
to which the purchaser, in return for the premium paid, has the
right to sell the security underlying the option at the specified
exercise price at any time during the term of the option. The
writer of the put option, who receives the premium, has the
obligation, upon exercise of the option, to buy the underlying
security at the exercise price. The premium paid by the
purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the time remaining to
expiration of the option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the
Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the
exercise of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing
sale transaction can be effected at any particular time or at any
acceptable price. If any call or put option is not exercised or
sold, it will become worthless on its expiration date.
A Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by
the Fund if the premium, plus commission costs, paid by the Fund
to purchase the call or the put is less (or greater) than the
premium, less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if a call
or a put that a Fund has written lapses unexercised, because the
Fund would retain the premium. Any such gains (or losses) are
considered short-term capital gains (or losses) for Federal
income tax purposes. Net short-term capital gains, when
distributed by a Fund, are taxable as ordinary income. See
"Taxation."
A Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put previously purchased
by the Fund if the premium, less commission costs, received by
the Fund on the sale of the call or the put is greater (or less)
than the premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date, and
a Fund will realize a loss in the amount of the premium paid,
plus commission costs. Any such gain or loss will be long-term
or short-term gain or loss, depending upon a Fund's holding
period for the option.
Exchange-traded options generally have standardized terms
and are issued by a regulated clearing organization (such as the
Options Clearing Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by a Fund and
its counterparty (usually a securities dealer or a financial
institution) with no clearing organization guarantee. When a
Fund purchases an OTC option, it relies on the party from whom it
has purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty fails
to do so, a Fund will lose any premium paid for the option, as
well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to
determine the likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may write
(sell) covered call options on the Fund's securities in an
attempt to realize a greater current return than would be
realized on the securities alone. A Fund may also write covered
call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the
options). In view of the investment objectives of a Fund, the
Fund generally would write call options only in circumstances
where the investment adviser to the Fund does not anticipate
significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A Fund may write covered call options as described in the
Fund's Prospectus. A "covered" call option means generally that
so long as the Fund is obligated as the writer of a call option,
the Fund will (i) own the underlying securities subject to the
option, or (ii) have the right to acquire the underlying
securities through immediate conversion or exchange of
convertible preferred stocks or convertible debt securities owned
by the Fund. Although a Fund receives premium income from these
activities, any appreciation realized on an underlying security
will be limited by the terms of the call option. A Fund may
purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, a Fund receives a premium
for undertaking the obligation to sell the underlying security at
a fixed price during the option period, if the option is
exercised. So long as a Fund remains obligated as a writer of a
call option, it forgoes the opportunity to profit from increases
in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents
such a profit (and retains the risk of loss should the value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may
purchase a put option on an underlying security owned by the Fund
as a defensive technique in order to protect against an
anticipated decline in the value of the security. A Fund, as the
holder of the put option, may sell the underlying security at the
exercise price regardless of any decline in its market price. In
order for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise
price to cover the premium and transaction costs that a Fund must
pay. These costs will reduce any profit a Fund might have
realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce
any capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by a Fund for leveraging purposes.
A Fund may also purchase a put option on an underlying
security that it owns and at the same time write a call option on
the same security with the same exercise price and expiration
date. Depending on whether the underlying security appreciates
or depreciates in value, a Fund would sell the underlying
security for the exercise price either upon exercise of the call
option it has written or by exercising the put option it holds.
A Fund would enter into such transactions in order to profit from
the difference between the premium received by the Fund for the
writing of the call option and the premium paid by the Fund for
the purchase of the put option, thereby increasing the Fund's
current return. A Fund may write (sell) put options on
individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. A
Fund may purchase and sell (write) put and call options on
securities indices. An index assigns relative values to the
securities included in the index and the index fluctuates with
changes in the market values of the securities so included.
Options on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a specified
price, they give the purchaser the right to receive cash. The
amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiple (the
"multiplier"). The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function
similar to the unit of trading for a stock option. It determines
the total dollar value per contract of each point in the
difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on
different indices have different multipliers.
When a Fund writes a call or put option on a stock index,
the option is "covered", in the case of a call, or "secured", in
the case of a put, if the Fund maintains in a segregated account
with the Custodian cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain special risks. During the option
period, the covered call writer, in return for the premium on the
option, has given up the opportunity to profit from a price
increase in the underlying securities above the exercise price,
but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must
deliver the underlying securities (or cash in the case of an
index option) at the exercise price. If a put or call option
purchased by a Fund is not sold when it has remaining value, and
if the market price of the underlying security (or index), in the
case of a put, remains equal to or greater than the exercise
price or, in the case of a call, remains less than or equal to
the exercise price, a Fund will lose its entire investment in the
option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements
in a related security (or securities), the price of the put or
call option may move more or less than the price of the related
security (or securities). In this regard, there are differences
between the securities and options markets that could result in
an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. Furthermore,
if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the
price has risen or fallen more than the maximum amount specified
by the exchange. Closing transactions can be made for OTC
options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists.
There is no assurance that a Fund will be able to close out an
OTC option position at a favorable price prior to its expiration.
In the event of insolvency of the counterparty, a Fund might be
unable to close out an OTC option position at any time prior to
its expiration. Although a Fund may be able to offset to some
extent any adverse effects of being unable to liquidate an option
position, the Fund may experience losses in some cases as a
result of such inability.
A Fund's options activities may impact the level of its
portfolio turnover and brokerage commissions. See "Portfolio
Turnover."
A Fund's success in using options techniques depends, among
other things, on the Advisor's ability to predict accurately the
direction and volatility of price movements in the options and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS
IN GENERAL. A Fund may enter into futures contracts for
hedging purposes. A futures contract provides for the future
sale by one party and purchase by another party of a specified
quantity of a commodity at a specified price and time. When a
purchase or sale of a futures contract is made by a Fund, the
Fund is required to deposit with its Custodian (or broker, if
legally permitted) in a segregated account a specified amount of
cash or liquid securities ("initial margin"). The margin
required for a futures contract is set by the exchange on which
the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance
bond or good faith deposit on the futures contract which is
returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied. A futures
contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does
not represent a borrowing or loan by a Fund but is instead a
settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In
computing daily net asset value, the Fund will mark-to-market its
open futures position.
Although some futures contracts call for making or taking
delivery of the underlying securities, generally these
obligations are closed out prior to delivery of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations. When purchasing a
futures contract, a Fund will maintain with its Custodian in a
segregated account (and mark-to-market on a daily basis) cash or
liquid securities that, when added to the amounts deposited with
a futures commission merchant ("FCM") as margin, are equal to the
market value of the futures contract.
When selling a futures contact, a Fund will maintain with
its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract.
A Fund will only enter into futures contracts which are
standardized and traded on a U.S. or foreign exchange, board of
trade, or similar entity or quoted on an automated quotation
system. A Fund will not enter into a futures contract if,
immediately thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. A
Fund may engage in foreign currency futures contracts and related
options transactions for hedging purposes. A foreign currency
futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a foreign
currency at a specified price and time.
An option on a foreign currency futures contract gives the
holder the right, in return for the premium paid, to assume a
long position (call) or short position (put) in a futures
contract at a specified exercise price at any time during the
period of the option. Upon the exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true.
A Fund may purchase call and put options on foreign
currencies as a hedge against changes in the value of the U.S.
dollar (or another currency) in relation to a foreign currency in
which portfolio securities of the Fund may be denominated. A
call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of
foreign currency at a specified price during a fixed period of
time. The Fund may invest in options on foreign currency which
are either listed on a domestic securities exchange or traded on
a recognized foreign exchange.
In those situations where foreign currency options may not
be readily purchased (or where such options may be deemed
illiquid) in the currency in which the hedge is desired, the
hedge may be obtained by purchasing an option on a "surrogate"
currency (i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies).
A surrogate currency's exchange rate movements parallel that of
the primary currency. Surrogate currencies are used to hedge an
illiquid currency risk, when no liquid hedge instruments exist in
world currency markets for the primary currency.
A Fund will only enter into currency futures contracts and
futures options that are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity or quoted on
an automated quotation system. A Fund will not enter into a
futures contract or purchase an option thereon if, immediately
thereafter, the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open
futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into. A call
option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A
put option is "in the money" if the exercise price exceeds the
value of the futures contract that is the subject of the option.
For additional information about margin deposits required with
respect to futures contracts and options thereon, see "Futures
Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. A
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can
be no guarantee that there will be a correlation between price
movements in the hedging vehicle and in a Fund's portfolio
securities being hedged. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as
variations in speculative market demand for futures and futures
options on securities, including technical influences in futures
trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying
the standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or a futures
option position, and the Fund would remain obligated to meet
margin requirements until the position is closed. In addition,
there can be no assurance that an active secondary market will
continue to exist.
Currency futures contracts and options thereon may be traded
on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the United States; may not
involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such position
also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
STOCK INDEX FUTURES CONTRACTS
A Fund may enter into stock (or "securities") index futures
contracts as an efficient means of regulating the Fund's exposure
to the equity markets. A Fund will not engage in transactions in
futures contracts for speculation but only as a hedge against
changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which it intends to
purchase.
An index futures contract is a contract to buy or sell units
of an index at a specified future date at a price agreed upon
when the contract is made. Entering into a contract to buy units
of an index is commonly referred to as purchasing a contract or
holding a long position in the index. Entering into a contract
to sell units of an index is commonly referred to as selling a
contract or holding a short position. The value of a unit is the
current value of the stock index. For example, the S&P 500 Index
is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange (the "Exchange"). The S&P
500 Index assigns relative weightings to the 500 common stocks
included in the Index, and the Index fluctuates with changes in
the market values of the shares of those common stocks. In the
case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The index
futures contract specifies that no delivery of the actual
securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the
expiration of the contract. For example, if a Fund enters into a
futures contract to buy 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, a Fund will gain $2,000
(500 units x gain of $4). If a Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A Fund's success in
using hedging techniques depends, among other things, on IMI's
ability to predict correctly the direction and volatility of
price movements in the futures and options markets as well as in
the securities markets and to select the proper type, time and
duration of hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
A Fund's ability to hedge effectively all or a portion of
its securities through transactions in index futures (and
therefore the extent of its gain or loss on such transactions)
depends on the degree to which price movements in the underlying
index correlate with price movements in the Fund's securities.
Insofar as such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, a Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount as the
hedging instrument. This risk will increase as the composition
of a Fund's portfolio diverges from the composition of the
hedging instrument.
Although a Fund intends to establish positions in these
instruments only when there appears to be an active market, there
is no assurance that a liquid market will exist at a time when
the Fund seeks to close a particular option or futures position.
Trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers. In addition, the futures exchanges may suspend trading
after the price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, a Fund may experience
losses as a result of its inability to close out a position, and
it may have to liquidate other investments to meet its cash
needs.
Although some index futures contracts call for making or
taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
A Fund will only enter into index futures contracts or
futures options that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. A Fund will use futures
contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of
the CFTC.
When purchasing an index futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by a Fund.
When selling an index futures contract, a Fund will maintain
with its Custodian in a segregated account (and mark-to-market on
a daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting a Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if the
difference is maintained in cash or liquid assets with the Fund's
Custodian in a segregated account).
COMBINED TRANSACTIONS
A Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and some
combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in
the opinion of IMI, it is in the best interests of a Fund to do
so. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although
combined transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the management
objective.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set forth in the
Prospectus under "Investment Objectives and Policies," and the
investment restrictions set forth below are fundamental policies
of the Fund and may not be changed with respect to that Fund
without the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of that Fund. Under these
restrictions, each of Ivy Asia Pacific Fund, Ivy China Region
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy International Small Companies Fund, Ivy South America
Fund, Ivy Developing Nations Fund and Ivy Pan-Europe Fund may
not:
(i) make an investment in securities of companies in any
one industry (except obligations of domestic banks or
the U.S. Government, its agencies, authorities, or
instrumentalities) if such investment would cause
investments in such industry to exceed 25% of the
market value of the Fund's total assets at the time of
such investment; or
(ii) issue senior securities, except as appropriate to
evidence indebtedness which it is permitted to incur,
and except to the extent that shares of the separate
classes or series of the Trust may be deemed to be
senior securities; provided that collateral
arrangements with respect to currency-related
contracts, futures contracts, options or other
permitted investments, including deposits of initial
and variation margin, are not considered to be the
issuance of senior securities for purposes of this
restriction.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Small Companies Fund, Ivy
Developing Nations Fund and Ivy Pan-Europe Fund may not:
(i) purchase securities of any one issuer (except U.S.
Government securities) if as a result more than 5% of
the Fund's total assets would be invested in such
issuer or the Fund would own or hold more than 10% of
the outstanding voting securities of that issuer;
provided, however, that up to 25% of the value of the
Fund's total assets may be invested without regard to
these limitations.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy International Fund II,
Ivy International Fund, Ivy South America Fund and Ivy Developing
Nations Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities
except for its own capital stock.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund, Ivy South America Fund and Ivy Developing
Nations Fund may not:
(i) purchase securities on margin.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy International Fund, Ivy South America
Fund and Ivy Developing Nations Fund may not:
(i) purchase from or sell to any of its officers or
trustees, or firms of which any of them are members or
which they control, any securities (other than capital
stock of the Fund), but such persons or firms may act
as brokers for the Fund for customary commissions to
the extent permitted by the Investment Company Act of
1940.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Canada Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy International Fund II, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but Ivy Asia Pacific Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund may make margin
deposits in connection with transactions in options,
futures and options on futures; or
(ii) Make loans, except this restriction shall not prohibit
(a) the purchase and holding of a portion of an issue
of publicly distributed debt securities, (b) the entry
into repurchase agreements with banks or broker-
dealers, or, with respect to Ivy Asia Pacific Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund, (c) the lending
of the Fund's portfolio securities in accordance with
applicable guidelines established by the Securities and
Exchange Commission (the "SEC") and any guidelines
established by the Trust's Trustees.
Further, as a matter of fundamental policy, Ivy Canada Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Make investments in securities for the purpose of
exercising control over or management of the issuer; or
(ii) Act as an underwriter of securities, except to the
extent that, in connection with the sale of securities,
it may be deemed to be an underwriter under applicable
securities laws.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) borrow money, except as a temporary measure for
extraordinary or emergency purposes, and provided that
the Fund maintains asset coverage of 300% for all
borrowings.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe may not:
(i) Invest in real estate, real estate mortgage loans,
commodities or interests in oil, gas and/or mineral
exploration or development programs, although (a) the
Fund may purchase and sell marketable securities of
issuers which are secured by real estate, (b) the Fund
may purchase and sell securities of issuers which
invest or deal in real estate, (c) the Fund may enter
into forward foreign currency contracts as described in
the Fund's prospectus, and (d) the Fund may write or
buy puts, calls, straddles or spreads and may invest in
commodity futures contracts and options on futures
contracts.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy International Fund II, Ivy International
Fund, Ivy South America Fund and Ivy Developing Nations Fund may
not:
(i) purchase or sell real estate or commodities and
commodity contracts.
Each of Ivy China Region Fund, Ivy International Fund II,
Ivy International Fund, Ivy South America Fund and Ivy Developing
Nations Fund will continue to interpret fundamental investment
restriction (i) above to prohibit investment in real estate
limited partnership interests; this restriction shall not,
however, prohibit investment in readily marketable securities of
companies that invest in real estate or interests therein,
including real estate investment trusts.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy International Fund, Ivy South America Fund
and Ivy Developing Nations Fund may not:
(i) sell securities short.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, Ivy International
Small Companies Fund, Ivy South America Fund and Ivy Developing
Nations Fund may not:
(i) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreements, (b) the purchase of publicly
distributed bonds, debentures and other securities of a
similar type, or privately placed municipal or
corporate bonds, debentures and other securities of a
type customarily purchased by institutional investors
or publicly traded in the securities markets, or (c)
the lending of portfolio securities (provided that the
loan is secured continuously by collateral consisting
of U.S. Government securities or cash or cash
equivalents maintained on a daily marked-to-market
basis in an amount at least equal to the market value
of the securities loaned).
Further, as a matter of fundamental policy, each of Ivy South
America Fund and Ivy Developing Nations Fund may not:
(i) borrow money, except for temporary or emergency
purposes; provided that the Fund maintains asset
coverage of 300% for all borrowings.
Further, as a matter of fundamental policy, each of Ivy China
Region Fund and Ivy International Fund may not:
(i) borrow money, except for temporary purposes where
investment transactions might advantageously require
it. Any such loan may not be for a period in excess of
60 days, and the aggregate amount of all outstanding
loans may not at any time exceed 10% of the value of
the total assets of the Fund at the time any such loan
is made.
Further, as a matter of fundamental policy, Ivy Canada Fund and
Ivy Global Fund may not:
(i) Participate on a joint or a joint and several basis in
any trading account in securities. The "bunching" of
orders of the Fund and of other accounts under the
investment management of the Manager (in the case of
Ivy Global Fund) or the investment adviser, Mackenzie
Financial Corporation (the "Investment Adviser") (in
the case of Ivy Canada Fund) for the sale or purchase
of portfolio securities shall not be considered
participation in a joint securities trading account;
(ii) Borrow amounts in excess of 10% of its total assets,
taken at the lower of cost or market value, and then
only from banks as a temporary measure for
extraordinary or emergency purposes. All borrowings
will be repaid before any additional investments are
made;
(iii) Purchase the securities of issuers conducting
their principal business activities in the same
industry if immediately after such purchase the
value of the Fund's investments in such industry
would exceed 25% of the value of the total assets
of the Fund;
(iv) Purchase any security if, as a result, the Fund would
then have more than 5% of its total assets (taken at
current value) invested in securities restricted as to
disposition under the Federal securities laws; or
(v) Issue senior securities, except insofar as the Fund may
be deemed to have issued a senior security in
connection with any repurchase agreement or any
permitted borrowing.
Further, as a matter of fundamental policy, Ivy Canada Fund may
not:
(i) Write or buy puts, calls, straddles or spreads; invest
in real estate, real estate mortgage loans,
commodities, commodity futures contracts or interests
in oil, gas and/or mineral exploration or development
programs, although (a) the Fund may purchase and sell
marketable securities of issuers which are secured by
real estate, (b) the Fund may purchase and sell
securities of issuers which invest or deal in real
estate, and (c) the Fund may enter into forward foreign
currency contracts as described in the Fund's
prospectus.
Further, as a matter of fundamental policy, Ivy Global Fund may
not:
(i) purchase securities of another investment company,
except in connection with a merger, consolidation,
reorganization or acquisition of assets, and except
that the Fund may invest in securities of other
investment companies subject to the restrictions in
Section 12(d)(1) of the Investment Company Act of 1940
(the "1940 Act").
Further, as a matter of fundamental policy, Ivy Global Science &
Technology Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities,
except for its own capital stock, and except to the
extent that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under the Federal securities laws;
(ii) purchase or sell real estate or commodities and
commodity contracts; provided, however, that the Fund
may purchase securities secured by real estate or
interests therein, or securities issued by companies
that invest in real estate or interests therein, and
except that, subject to the policies and restrictions
set forth in the Prospectus and elsewhere in this SAI,
(i) the Fund may enter into futures contracts, and
options thereon, and (ii) the Fund may enter into
forward foreign currency contracts and currency futures
contracts, and options thereon; or
(iii) sell securities short, except for short sales
"against the box."
Further, as a matter of fundamental policy, Ivy International
Fund II and Ivy International Fund may not:
(i) invest more than 5% of the value of its total assets in
the securities of any one issuer (except obligations of
domestic banks or the U.S. Government, its agencies,
authorities and instrumentalities); or
(ii) purchase the securities of any other open-end
investment company, except as part of a plan of merger
or consolidation.
Further, as a matter of fundamental policy, Ivy
International Fund may not:
(i) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreements or (b) the purchase of publicly
distributed bonds, debentures and other securities of a
similar type, or privately placed municipal or
corporate bonds, debentures and other securities of a
type customarily purchased by institutional investors
or publicly traded in the securities markets.
Under the 1940 Act, a Fund is permitted, subject to each
Fund's investment restrictions, to borrow money only from banks.
The Trust has no current intention of borrowing amounts in excess
of 5% of each of the Fund's assets.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund has adopted the
following additional restrictions, which are not fundamental and
which may be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory policy.
Under these restrictions, each of Ivy Asia Pacific Fund, Ivy
China Region Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Small Companies
Fund, Ivy South America Fund, Ivy Developing Nations Fund and Ivy
Pan-Europe Fund may not:
(i) invest more than 15% of its net assets taken at market
value at the time of investment in "illiquid
securities." Illiquid securities may include
securities subject to legal or contractual restrictions
on resale (including private placements), repurchase
agreements maturing in more than seven days, certain
options traded over the counter that the Fund has
purchased, securities being used to cover certain
options that a fund has written, securities for which
market quotations are not readily available, or other
securities which legally or in IMI's opinion, subject
to the Board's supervision, may be deemed illiquid, but
shall not include any instrument that, due to the
existence of a trading market, to the Fund's compliance
with certain conditions intended to provide liquidity,
or to other factors, is liquid.
Further, as a matter of non-fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy South America Fund and Ivy Developing Nations Fund may
not:
(i) invest in oil, gas or other mineral leases or
exploration or development programs.
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy China Region Fund, Ivy Global Natural
Resources Fund, Ivy International Small Companies Fund, Ivy South
America Fund, Ivy Developing Nations Fund and Ivy Pan-Europe Fund
may not:
(i) purchase securities of other investment companies,
except in connection with a merger, consolidation or
sale of assets, and except that it may purchase shares
of other investment companies subject to such
restrictions as may be imposed by the Investment
Company Act of 1940 and rules thereunder.
Further, as a matter of non-fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy International Fund, Ivy South America
Fund and Ivy Developing Nations Fund may not:
(i) invest in companies for the purpose of exercising
control of management; or
(ii) invest more than 5% of its total assets in warrants,
valued at the lower of cost or market, or more than 2%
of its total assets in warrants, so valued, which are
not listed on either the New York or American Stock
Exchanges.
Further, as a matter of non-fundamental policy, each of Ivy
Canada Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy International Small Companies Fund and Ivy Pan-Europe Fund
may not:
(i) purchase or sell interests in oil, gas or mineral
leases (other than securities of companies that invest
in or sponsor such programs).
Further, as a matter of non-fundamental policy, each of Ivy
Canada Fund, Ivy Global Fund, Ivy International Small Companies
Fund and Ivy Pan-Europe Fund may not:
(i) purchase or sell real estate limited partnership
interests.
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small Companies Fund and
Ivy Pan-Europe Fund may not:
(i) sell securities short, except for short sales "against
the box."
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) participate on a joint or a joint and several basis in
any trading account in securities. The "bunching" of
orders of the Fund and of other accounts under the
investment management of the Fund's investment adviser,
for the sale or purchase of portfolio securities shall
not be considered participation in a joint securities
trading account.
Further, as a matter of non-fundamental policy, Ivy South
America Fund may not:
(i) purchase or retain securities of an issuer if, with
respect to 75% of the Fund's total assets, such
purchase would result in more than 10% of the
outstanding voting securities of such issuer being held
by the Fund.
In addition, pursuant to the requirements of the 1940 Act,
Ivy International Fund, may not, with respect to 75% of its total
assets, invest more than 5% of its total assets in the securities
of any one issuer.
Whenever an investment objective, policy or restriction set
forth in the Prospectus or this SAI states a maximum percentage
of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the particular Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in the
percentage which results from circumstances not involving any
affirmative action by a Fund, such as a change in market
conditions or a change in the Fund's asset level or other
circumstances beyond the Fund's control, will not be considered a
violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears the cost
of providing to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds, other than the Funds, whose shares are also distributed
by Ivy Mackenzie Distributors, Inc. ("IMDI"). These funds are:
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy US Emerging
Growth Fund, Ivy High Yield Fund, Ivy Bond Fund and Ivy Money
Market Fund (the other six series of the Trust). Shareholders
should obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
Effective April 18, 1997, Ivy International Fund suspended
the offer of its shares to new investors. Shares of Ivy
International Fund are available for purchase only by existing
shareholders of Ivy International Fund. Once a shareholder's
account has been liquidated, the shareholder may not invest in
Ivy International Fund at a later date.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $50 per
month (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund
have an exchange privilege with certain other Ivy funds (except
Ivy International Fund unless they have an existing Ivy
International Fund account). Before effecting an exchange,
shareholders of each Fund should obtain and read the currently
effective prospectus for the Ivy fund into which the exchange is
to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy fund ("new Class A Shares") on the
basis of the relative net asset value per Class A share, plus an
amount equal to the difference, if any, between the sales charge
previously paid on the outstanding Class A shares and the sales
charge payable at the time of the exchange on the new Class A
shares. (The additional sales charge will be waived for Class A
shares that have been invested for a period of 12 months or
longer.) Class A shareholders may also exchange their shares for
shares of Ivy Money Market Fund (no initial sales charge will be
assessed at the time of such an exchange).
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A: Class A
shareholders may exchange their Class A shares that are subject
to a contingent deferred sales charge ("CDSC"), as described in
the Prospectus ("outstanding Class A shares"), for Class A shares
of another Ivy fund ("new Class A shares") on the basis of the
relative net asset value per Class A share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class A shares. Class A shareholders of a Fund
exercising the exchange privilege will continue to be subject to
that Fund's CDSC period following an exchange if such period is
longer than the CDSC period, if any, applicable to the new
Class A shares.
For purposes of computing the CDSC that may be payable upon
the redemption of the new Class A shares, the holding period of
the outstanding Class A shares is "tacked" onto the holding
period of the new Class A shares.
CLASS B: Class B shareholders may exchange their Class B
shares ("outstanding Class B shares") for Class B shares of
another Ivy fund ("new Class B shares") on the basis of the
relative net asset value per Class B share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class B shares. Class B shareholders of a Fund
exercising the exchange privilege will continue to be subject to
that Fund's CDSC schedule (or period) following an exchange if
such schedule is higher (or such period is longer) than the CDSC
schedule (or period) applicable to the new Class B shares.
Class B shares of a Fund acquired through an exchange of
Class B shares of another Ivy fund will be subject to that Fund's
CDSC schedule (or period) if such schedule is higher (or such
period is longer) than the CDSC schedule (or period) applicable
to the Ivy fund from which the exchange was made.
For purposes of both the conversion feature and computing
the CDSC that may be payable upon the redemption of the new
Class B shares (prior to conversion), the holding period of the
outstanding Class B shares is "tacked" onto the holding period of
the new Class B shares.
The following CDSC table applies to Class B shares of Ivy
Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy US Emerging Growth Fund, Ivy Global Fund, Ivy
Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy High
Yield Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy South America Fund,
Ivy Developing Nations Fund and Ivy Pan-Europe Fund:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C
shares ("outstanding Class C shares") for Class C shares of
another Ivy fund ("new Class C shares") on the basis of the
relative net asset value per Class C share, without the payment
of any CDSC that would otherwise be due upon redemption. (Class
C shares are subject to a CDSC of 1% if redeemed within one year
of the date of purchase.)/
CLASS I: Subject to the restrictions set forth in the
following paragraph, Class I shareholders may exchange their
outstanding Class I shares for Class I shares of another Ivy fund
on the basis of the relative net asset value per Class I share.
ALL CLASSES: The minimum value of shares which may be
exchanged into an Ivy fund in which shares are not already held
is $1,000 ($5,000,000 in the case of Class I shares of Ivy Global
Science & Technology Fund, Ivy International Fund, Ivy
International Fund II and Ivy International Small Companies Fund
(generally referred to herein as the "Class I Funds"), and
$250,000 in the case of Ivy High Yield Fund and Ivy Bond Fund).
No exchange out of the Fund (other than by a complete exchange of
all Fund shares) may be made if it would reduce the shareholder's
interest in the Fund to less than $1,000 ($250,000 in the case of
Class I shares of the Fund).
Each exchange will be made on the basis of the relative net
asset values per share of each fund of Ivy Fund next computed
following receipt by IMSC of telephone instructions by IMSC or a
properly executed request. Exchanges, whether written or
telephonic, must be received by IMSC by the close of regular
trading on the New York Stock Exchange, Inc. (the "Exchange")
(normally 4:00 p.m., eastern time) to receive the price computed
on the day of receipt. Exchange requests received after that
time will receive the price next determined following receipt of
the request. The exchange privilege may be modified or
terminated at any time, upon at least 60 days' notice to the
extent required by applicable law. See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments in
Class A shares of each Fund made pursuant to a non-binding Letter
of Intent. A Letter of Intent may be submitted by an individual,
his or her spouse and children under the age of 21, or a trustee
or other fiduciary of a single trust estate or single fiduciary
account. See the Account Application in the Prospectus. Any
investor may submit a Letter of Intent stating that he or she
will invest, over a period of 13 months, at least $50,000 in
Class A shares of a Fund. A Letter of Intent may be submitted at
the time of an initial purchase of Class A shares of a Fund or
within 90 days of the initial purchase, in which case the Letter
of Intent will be back dated. A shareholder may include, as an
accumulation credit, the value (at the applicable offering price)
of all Class A shares of Ivy Asia Pacific Fund, Ivy China Region
Fund, Ivy Canada Fund, Ivy South America Fund, Ivy International
Fund, Ivy International Fund II, Ivy Pan-Europe Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy US Emerging Growth Fund, Ivy High Yield Fund, Ivy
International Small Companies Fund, Ivy Developing Nations Fund
and Ivy Bond Fund (and shares that have been exchanged into Ivy
Money Market Fund from any of the other funds in the Ivy funds)
held of record by him or her as of the date of his or her Letter
of Intent. During the term of the Letter of Intent, the Transfer
Agent will hold Class A shares representing 5% of the indicated
amount (less any accumulation credit value) in escrow. The
escrowed Class A shares will be released when the full indicated
amount has been purchased. If the full indicated amount is not
purchased during the term of the Letter of Intent, the investor
is required to pay IMDI an amount equal to the difference between
the dollar amount of sales charge that he or she has paid and
that which he or she would have paid on his or her aggregate
purchases if the total of such purchases had been made at a
single time. Such payment will be made by an automatic liquida-
tion of Class A shares in the escrow account. A Letter of Intent
does not obligate the investor to buy or the Trust to sell the
indicated amount of Class A shares, and the investor should read
carefully all the provisions of such letter before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the funds of Ivy Fund in
accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent
purchase payments in connection with tax-deferred retirement
plans must be at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified across
several funds of Ivy Fund, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the Trust may be
used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in an Ivy fund if
that fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant,
whether the individual's contribution to an IRA is fully
deductible, partially deductible or not deductible depends on
(i) adjusted gross income and (ii) whether it is the individual
or the individual's spouse who is an active participant, in the
case of married individuals filing jointly. Contributions may be
made up to the maximum permissible amount even if they are not
deductible. Rollover contributions are not includible in income
for Federal income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, amounts withdrawn
and used to pay for deductible medical expenses and amounts
withdrawn by certain unemployed individuals not in excess of
amounts paid for certain health insurance premiums, amounts used
to pay certain qualified higher education expenses, and amounts
used within 120 days of the date the distribution is received to
pay for certain first-time homebuyer expenses. Distributions
must begin to be withdrawn not later than April 1 of the calendar
year following the calendar year in which the individual reaches
age 70-1/2. Failure to take certain minimum required distribu-
tions will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year
(other than 1997, 1998 or 1999) from an IRA (or from an IRA and
other retirement plans) may also result in a penalty tax.
ROTH IRAS: Shares of the Trust also may be used as a
funding medium for a Roth Individual Retirement Account ("Roth
IRA"). A Roth IRA is similar in numerous ways to the regular
(traditional) IRA, described above. Some of the primary
differences are as follows.
A single individual earning below $95,000 can contribute up
to $2,000 per year to a Roth IRA. The maximum contribution
amount diminishes and gradually falls to zero for single filers
with adjusted gross incomes ranging from $95,000 to $110,000.
Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA).
The maximum contribution amount for married couples filing
jointly phases out from $150,000 to $160,000. An individual
whose adjusted gross income exceeds the maximum phase-out amount
cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional
IRA and a Roth IRA as long as the total contribution to all IRAs
does not exceed $2,000. Contributions to a Roth IRA are not
deductible. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained
age 70 1/2.
No distributions are required to be taken prior to the death
of the original account holder. If a Roth IRA has been
established for a minimum of five years, distributions can be
taken tax-free after reaching age 59 1/2, for a first-time home
purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical
expenses, the purchase of health insurance for an unemployed
individual and education expenses.
An individual with an income of less than $100,000 (who is
not married filing separately) can roll his or her existing IRA
into a Roth IRA. However, the individual must pay taxes on the
taxable amount in his or her traditional IRA. Individuals who
complete the rollover in 1998 will be allowed to spread the tax
payments over a four-year period. After 1998, all taxes on such
a rollover will have to be paid in the tax year in which the
rollover is made.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more of the funds of Ivy Fund
through a qualified retirement plan, a Custodial Agreement and a
Retirement Plan are available from IMSC. The Retirement Plan may
be adopted as a profit sharing plan or a money purchase pension
plan. A profit sharing plan permits an annual contribution to be
made in an amount determined each year by the self-employed
individual within certain limits prescribed by law. A money
purchase pension plan requires annual contributions at the level
specified in the Custodial Agreement. There is no set-up fee for
qualified plans and the annual maintenance fee is $20.00 per
account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of a Fund may
reinvest all or a part of the proceeds of the redemption back
into Class A shares of the Fund at net asset value (without a
sales charge) within 60 days from the date of redemption. This
privilege may be exercised only once. The reinvestment will be
made at the net asset value next determined after receipt by IMSC
of the reinvestment order accompanied by the funds to be
reinvested. No compensation will be paid to any sales personnel
or dealer in connection with the transaction.
Any redemption is a taxable event. A loss realized on a
redemption generally may be disallowed for tax purposes if the
reinvestment privilege is exercised within 30 days after the
redemption. In certain circumstances, shareholders will be
ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment
of $50,000 or more in Class A shares of a Fund. See "Initial
Sales Charge Alternative -- Class A Shares" in the Prospectus.
The reduced sales charge is applicable to investments made at one
time by an individual, his or her spouse and children under the
age of 21, or a trustee or other fiduciary of a single trust
estate or single fiduciary account (including a pension, profit
sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Code). Rights of
Accumulation is also applicable to current purchases of all of
the funds of Ivy Fund (except Ivy Money Market Fund) by any of
the persons enumerated above, where the aggregate quantity of
Class A shares of Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy US Emerging Growth Fund,
Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy High Yield Fund, Ivy
International Small Companies Fund, Ivy South America Fund, Ivy
Developing Nations Fund, Ivy International Fund II and Ivy Pan-
Europe Fund (and shares that have been exchanged into Ivy Money
Market Fund from any of the other funds in the Ivy funds) and of
any other investment company distributed by IMDI, previously
purchased or acquired and currently owned, determined at the
higher of current offering price or amount invested, plus the
Class A shares being purchased, amounts to $50,000 or more for
Ivy Asia Pacific Fund, Ivy Canada Fund, Ivy China Region Fund,
Ivy US Emerging Growth Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy
International Small Companies Fund, Ivy South America Fund, Ivy
Developing Nations Fund, Ivy International Fund II, Ivy Pan-
Europe Fund; or $100,000 or more for Ivy Bond Fund or Ivy High
Yield Fund.
At the time an investment takes place, IMSC must be notified
by the investor or his or her dealer that the investment
qualifies for the reduced sales charge on the basis of previous
investments. The reduced sales charge is subject to confirmation
of the investor's holdings through a check of the particular
fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (except shareholders with accounts in Class I
of the Class I Funds) may establish a Systematic Withdrawal Plan
(a "Withdrawal Plan"), by telephone instructions or by delivery
to IMSC of a written election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in such shareholder's name,
properly endorsed by the shareholder. To be eligible to elect a
Withdrawal Plan, a shareholder must have at least $5,000 in his
or her account. A Withdrawal Plan may not be established if the
investor is currently participating in the Automatic Investment
Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
Additional investments made by investors participating in a
Withdrawal Plan must equal at least $1,000 each while the
Withdrawal Plan is in effect. Making additional purchases while
a Withdrawal Plan is in effect may be disadvantageous to the
investor because of applicable initial sales charges or CDSCs.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares may be purchased in connection with investment
programs established by employee or other groups using systematic
payroll deductions or other systematic payment arrangements. The
Trust does not itself organize, offer or administer any such
programs. However, it may, depending upon the size of the
program, waive the minimum initial and additional investment
requirements for purchases by individuals in conjunction with
programs organized and offered by others. Unless shares of a
Fund are purchased in conjunction with IRAs (see "How to Buy
Shares" in the Prospectus), such group systematic investment
programs are not entitled to special tax benefits under the Code.
The Trust reserves the right to refuse purchases at any time or
suspend the offering of shares in connection with group
systematic investment programs, and to restrict the offering of
shareholder privileges, such as check writing, simplified
redemptions and other optional privileges, as described in the
Prospectus, to shareholders using group systematic investment
programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay such fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
Class A shares of a Fund are made available to Merrill Lynch
Daily K Plan (the "Plan") participants at NAV without an initial
sales charge if:
(i) the Plan is recordkept on a daily valuation basis by
Merrill Lynch and, on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has
$3 million or more in assets invested in broker/dealer funds
not advised or managed by Merrill Lynch Asset Management,
L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the fund's principal
underwriter or distributor and in funds advised or managed
by MLAM (collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through
a contract or alliance arrangement with Merrill Lynch, and
on the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as
determined by Merrill Lynch plan conversion manager, on the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement.
Alternatively, Class B shares of a Fund are made available
to Plan participants at NAV without a CDSC if the Plan conforms
with the requirements for eligibility set forth in (i) through
(iii) above but either does not meet the $3 million asset
threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an
independent recordkeeper under a contract with Merrill Lynch that
are currently investing in Class B shares of a Fund convert to
Class A shares once the Plan has reached $5 million invested in
Applicable Investments, or 10 years after the date of the initial
purchase by a participant under the Plan--the Plan will receive a
Plan level share conversion.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI (or MFC with respect to Ivy Canada Fund and Ivy Global
Natural Resources Fund) places orders for the purchase and sale
of each Fund's portfolio securities. With respect to Ivy
International Fund, Northern Cross also places orders for the
purchase and sale of the Fund's portfolio securities. All
portfolio transactions are effected at the best price and
execution obtainable. Purchases and sales of debt securities are
usually principal transactions, and, therefore, brokerage
commissions are usually not required to be paid by the particular
Fund for such purchases and sales (although the price paid
generally includes undisclosed compensation to the dealer). The
prices paid to underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI (or MFC for Ivy Canada Fund
and Ivy Global Natural Resources Fund and the Subadviser for Ivy
International Fund) attempts to deal directly with the principal
market makers, except in those circumstances where IMI (or MFC
for Ivy Canada Fund and Ivy Global Natural Resources Fund and the
Subadviser for Ivy International Fund) believes that a better
price and execution are available elsewhere.
IMI (or MFC for Ivy Canada Fund and Ivy Global Natural
Resources Fund and the Subadviser for Ivy International Fund)
selects broker-dealers to execute transactions and evaluates the
reasonableness of commissions on the basis of quality, quantity,
and the nature of the firms' professional services. Commissions
to be charged and the rendering of investment services, including
statistical, research, and counseling services by brokerage
firms, are factors to be considered in the placing of brokerage
business. The types of research services provided by brokers may
include general economic and industry data, and information on
securities of specific companies. Research services furnished by
brokers through whom the Trust effects securities transactions
may be used by IMI (or MFC for Ivy Canada Fund and Ivy Global
Natural Resources Fund and the Subadviser for Ivy International
Fund) in servicing all of its accounts. In addition, not all of
these services may be used by IMI (or MFC for Ivy Canada Fund and
Ivy Global Natural Resources Fund and the Subadviser for Ivy
International Fund) in connection with the services it provides
to a particular Fund or the Trust. IMI (or MFC for Ivy Canada
Fund and Ivy Global Natural Resources Fund and the Subadviser for
Ivy International Fund) may consider sales of shares of Ivy funds
as a factor in the selection of broker-dealers and may select
broker-dealers who provide it with research services. IMI (or
MFC for Ivy Canada Fund and Ivy Global Natural Resources Fund and
the Subadviser for Ivy International Fund) will not, however,
execute brokerage transactions other than at the best price and
execution.
With respect to Ivy International Fund, when a security
proposed to be purchased or sold for the Fund is also to be
purchased or sold at the same time for other accounts managed by
the Subadviser, purchases or sales are effected on a pro rata,
rotating or other equitable basis so as to avoid any one account
being preferred over any other account.
During the fiscal year ended December 31, 1995, 1996 and
1997, Ivy International Fund paid brokerage commissions of
$715,524, $1,709,643 and $2,987,187, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Canada Fund paid brokerage commissions of $79,464,
$102,121 and $130,955, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy China Region Fund paid brokerage commissions of
$70,459, $62,812 and $70,846, respectively.
During the fiscal years ended December 31, 1995, 1996, and
1997 Ivy Global Fund paid brokerage commissions of $96,124,
$90,904 and $123,985, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy South America Fund paid brokerage commissions of
$17,184, $15,756 and $17,213, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Developing Nations Fund paid brokerage commissions of
and $15,236, $95,606 and $181,553, respectively.
During the period from July 22, 1996 (commencement of
operations) to December 31, 1996 Ivy Global Science & Technology
Fund paid brokerage commissions of $37,065. During the fiscal
year ended December 31, 1997, Ivy Global Science & Technology
Fund paid brokerage commissions of $99,546.
During the fiscal year ended December 31, 1997, Ivy Asia
Pacific Fund paid brokerage commissions of $18,500.
During the fiscal year ended December 31, 1997, Ivy Global
Natural Resources Fund paid brokerage commissions of $133,788.
During the fiscal year ended December 31, 1997, Ivy
International Small Companies Fund paid brokerage commissions of
$17,540.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, Ivy International Fund II paid
brokerage commissions of $1,080.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, Ivy Pan-Europe Fund paid
brokerage commissions of $406,191.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each of these Funds
will accept securities only to increase its holdings in a
portfolio security or to take a new portfolio position in a
security that IMI (and the Subadviser for Ivy International Fund)
deems to be a desirable investment for each the Fund. While no
minimum has been established, it is expected that each the Fund
will not accept securities having an aggregate value of less than
$1 million. The Trust may reject in whole or in part any or all
offers to pay for the Fund shares with securities and may
discontinue accepting securities as payment for the Fund shares
at any time without notice. The Trust will value accepted
securities in the manner and at the same time provided for
valuing portfolio securities of each the Fund, and the Fund
shares will be sold for net asset value determined at the same
time the accepted securities are valued. The Trust will only
accept securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 74 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1998).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 74 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1998); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998);Director of The
Mackenzie Funds Inc. (1994-
1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 77 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1998);Director of The
Mackenzie Funds Inc. (1987-
1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 72
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 51 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1998);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-1998).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 63 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 74 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1998).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 41 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1998); Vice President
of Mackenzie Series Trust
(1994-1998); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Trustee
of Mackenzie Series Trust
(1996-1998).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 53 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1998).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 56 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. Employees of IMI
are permitted to make personal securities transactions, subject
to the requirements and restrictions set forth in IMI's Code of
Ethics. The Code of Ethics is designed to identify and address
certain conflicts of interest between personal investment
activities and the interests of investment advisory clients such
as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment
Company Institute's Advisory Group on Personal Investing,
prohibits certain types of transactions absent prior approval,
applies to portfolio managers, traders, research analysts and
others involved in the investment advisory process, and imposes
time periods during which personal transactions may not be made
in certain securities, and requires the submission of duplicate
broker confirmations and monthly reporting of securities
transactions. Exceptions to these and other provisions of the
Code of Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1997)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES[*]
John S. $13,722 N/A N/A $15,000
Anderegg, Jr.
(Trustee)
Paul H. $13,722 N/A N/A $15,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $13,722 N/A N/A $15,000
Channick
(Trustee)
Frank W. $13,722 N/A N/A $15,000
DeFriece, Jr.
(Trustee)
Roy J. $13,722 N/A N/A $15,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $13,722 N/A N/A $15,000
Rosenthal
(Trustee)
Richard N. $13,722 N/A N/A $15,000
Silverman
(Trustee)
J. Brendan $13,722 N/A N/A $15,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] During the year ended December 31, 1997, the fund complex
consisted of the Trust, which had 17 funds at year end, and
Mackenzie Series Trust, an open-end, management investment
company comprised of 4 funds that were reorganized into
series of unaffiliated investment companies on September 5,
1997.
As of April 27, 1998, the Officers and Trustees of the Trust
as a group owned beneficially or of record less than 1% of the
outstanding Class A, Class B, Class C, Class I and Advisor Class
shares of the Funds and of the other six Ivy funds that are
series of the Trust but that are not described in this SAI,
except that the Officers and Trustees of the Trust as a group
owned 2.838% and 2.348%, respectively, of Ivy Asia Pacific Fund
Class A shares and Ivy Global Natural Resources Fund Class A
shares as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to each Fund (other than Ivy Canada Fund and Ivy Global
Natural Resources Fund) pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). IMI provides
business management services to Ivy Canada Fund and Ivy Global
Natural Resources Fund pursuant to a Business Management
Agreement (the "Management Agreement"). The Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved (i) by the sole
shareholder of Ivy China Region Fund on October 23, 1993, (ii) by
the shareholders of Ivy International Fund on December 30, 1991,
(iii) by the sole shareholder of each of Ivy South America Fund
and Ivy Developing Nations Fund on October 28, 1994, (iv) by the
sole shareholder of each of Ivy Global Fund and Ivy Canada Fund
on January 27, 1995, (v) by the sole shareholder of Ivy Global
Science & Technology Fund on July 16, 1996, (vi) by the sole
shareholder of each of Ivy Asia Pacific Fund, Ivy Global Natural
Resources Fund and Ivy International Small Companies Fund on
December 13, 1996, and (vii) by the sole shareholder of each of
Ivy International Fund II and Ivy Pan-Europe Fund on April 30,
1997. Prior to shareholder approval, the Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved by the Board
(including a majority of the Trustees who are neither "interested
persons," as defined in the 1940 Act, of the Trust nor have any
direct or indirect financial interest in the operation of the
distribution plan or in any related agreement (the "Independent
Trustees")) (i) on August 23, 1993 with respect to Ivy China
Region Fund, (ii) on October 28, 1991 with respect to Ivy
International Fund, (iii) on September 17, 1994 with respect to
Ivy South America Fund and Ivy Developing Nations Fund, (iv) on
September 29, 1994 with respect to each of Ivy Canada Fund and
Ivy Global Natural Resources Fund, (v) on June 8, 1996 with
respect to Ivy Global Science & Technology Fund, (vi) on December
7, 1996 with respect to each of Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund and Ivy International Small Companies
Fund, (vii) on February 8, 1997 with respect to Ivy Pan-Europe
Fund, and (viii) on April 29, 1997 with respect to Ivy
International Fund II.
Until January 31, 1995 MIMI served as the manager and
investment adviser to Ivy Global Fund and as manager to Ivy
Canada Fund, which were then series of The Mackenzie Funds Inc.
(the "Company"). On January 31, 1995, MIMI's interest in the
Agreement (in the case of Ivy Global Fund) and in the Management
Agreement (in the case of Ivy Canada Fund) was assigned by MIMI
to IMI, which is a wholly owned subsidiary of MIMI. The
provisions of the Agreement and the Management Agreement remain
unchanged by IMI's succession to MIMI thereunder. MIMI, a
Delaware corporation, has approximately 10% of its outstanding
common stock listed for trading on the TSE. MIMI is a subsidiary
of MFC, 150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario and registered in
Ontario as a mutual fund dealer whose shares are listed for
trading on the TSE. MFC provides investment advisory services to
Ivy Canada Fund and Ivy Global Natural Resources Fund pursuant to
an Investment Advisory Agreement (the "MFC Agreement"). The MFC
Agreement was approved (i) by the sole shareholder of Ivy Canada
Fund on January 27, 1995 and (ii) by the sole shareholder of Ivy
Global Natural Resources Fund on December 13, 1996. Prior to
shareholder approval, the MFC Agreement was approved by the Board
(including a majority of Independent Trustees) (i) on September
29, 1994 with respect to Ivy Canada Fund and (ii) on December 7,
1996 with respect to Ivy Global Natural Resources Fund.
IMI currently acts as manager and investment adviser to the
following additional investment companies registered under the
1940 Act: Ivy Growth Fund, Ivy US Emerging Growth Fund, Ivy
Growth with Income Fund, Ivy Bond Fund, Ivy High Yield Fund and
Ivy Money Market Fund.
The Agreement obligates IMI to make investments for the
accounts of each Fund (except Ivy Canada Fund and Ivy Global
Natural Resources Fund) in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Prospectus, the 1940 Act and the provisions of the Code
relating to regulated investment companies, subject to policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by these Funds and places
orders with brokers or dealers who deal in such securities. The
Advisory Agreement obligates MFC to make investments for the
account of each of Ivy Canada Fund and Ivy Global Natural
Resources Fund, in accordance with its best judgment and within
the investment objectives and restrictions set forth in the
Prospectus with respect to each of Ivy Canada Fund and Ivy Global
Natural Resources Fund, the 1940 Act and the provisions of the
Code, relating to regulated investment companies, subject to
policy decisions adopted by the Board. MFC also determines the
securities to be purchased or sold by each of Ivy Canada Fund and
Ivy Global Natural Resources Fund and places orders with brokers
or dealers who deal in such securities.
Under the Agreement (the Management Agreement with respect
to Ivy Canada Fund and Ivy Global Natural Resources Fund), IMI
also provides certain business management services. IMI is
obligated to (1) coordinate with each Fund's Custodian and
monitor the services it provides to that Fund; (2) coordinate
with and monitor any other third parties furnishing services to
each Fund; (3) provide each Fund with necessary office space,
telephones and other communications facilities as are adequate
for the particular Fund's needs; (4) provide the services of
individuals competent to perform administrative and clerical
functions that are not performed by employees or other agents
engaged by the particular Fund or by IMI acting in some other
capacity pursuant to a separate agreement or arrangements with
the Fund; (5) maintain or supervise the maintenance by third
parties of such books and records of the Trust as may be required
by applicable Federal or state law; (6) authorize and permit
IMI's directors, officers and employees who may be elected or
appointed as trustees or officers of the Trust to serve in such
capacities; and (7) take such other action with respect to the
Trust, after approval by the Trust as may be required by
applicable law, including without limitation the rules and
regulations of the SEC and of state securities commissions and
other regulatory agencies. Pursuant to the Management Agreement,
IMI is also responsible for reviewing the activities of MFC to
insure that each of Ivy Canada Fund and Ivy Global Natural
Resources Fund is operated in compliance with each such Fund's
investment objectives and policies and with the 1940 Act.
Ivy Global Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual
rate of 1.00% of the first $500 million of its average net
assets, reduced to 0.75% on average net assets over $500 million.
Each of the other Funds (except Ivy Canada Fund and Ivy Global
Natural Resources Fund) pays IMI a monthly fee for providing
business management and investment advisory serves at an annual
rate of 1.00% of each of the Fund's average net assets. Ivy
Canada Fund and Ivy Global Natural Resources Fund each pays IMI a
monthly fee for providing business management services at an
annual rate of 0.50% of each such Fund's average net assets.
For advisory services, Ivy Canada Fund and Ivy Global
Natural Resources Fund each pays MFC a monthly fee at an annual
rate of 0.35% and 0.50%, respectively, of the average net assets
of each such Fund. For the fiscal years ended December 31, 1995,
1996 and 1997, Ivy Canada Fund paid MFC fees of $67,229, $65,289
and $53,306, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy China Region Fund paid IMI $200,605, $233,804 and
$277,601 respectively (of which IMI reimbursed $106,085, $65,675
and $18,377, respectively, pursuant to voluntary expense
limitations).
During the fiscal years ended December 31, 1995, 1996 and
1997, IMI received fees of $96,041, $93,270 and $76,152,
respectively, from Ivy Canada Fund (of which IMI reimbursed
$63,466, $0 and $0, respectively, pursuant to required expense
limitations) and $239,963, $301,433 and $383,981, respectively,
from Ivy Global Fund (of which IMI reimbursed $62,242, $0 and $0
pursuant to voluntary expense limitations).
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy International Fund paid IMI fees of $3,948,456, $9,157,858
and $22,898,279, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy South America Fund paid IMI fees of $95,380, $42,550
and $94,278, respectively (of which IMI reimbursed $93,340, $0
and $0, respectively, pursuant to required expense limitations
and of which IMI reimbursed $2,040, $99,630 and $68,548,
respectively, pursuant to voluntary expense limitations) and Ivy
Developing Nations Fund paid IMI fees of $91,226, $109,125 and
$284,290, respectively (of which IMI reimbursed $87,348, $0 and
$0, respectively, pursuant to required expense limitations and of
which IMI reimbursed $3,878, $67,600 and $22,860, respectively,
pursuant to voluntary expense limitations).
During the period from July 22, 1996 (commencement of
operations) to December 31, 1996 and during the fiscal year ended
December 31, 1997, Ivy Global Science & Technology Fund paid IMI
fees of $20,965 and $229,616, respectively (of which IMI
reimbursed $14,813 and $0, respectively, pursuant to voluntary
expense limitations).
During the fiscal year ended December 31, 1997, Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund paid IMI fees of $10,473,
$32,056 and $28,799, respectively (of which IMI Reimbursed
$10,473, $25,180 and $28,799, respectively, pursuant to voluntary
expense limitations.) During the period from May 13, 1997
(commencement of operations) to December 31, 1997, Ivy
International Fund II and Ivy Pan-Europe Fund paid IMI fees of
$413,862 and $1,974, respectively (of which IMI reimbursed
$123,177 and $1,974, respectively, pursuant to voluntary expense
limitations).
Under the Agreement (or the Management Agreement and the
Advisory Agreement with respect to Ivy Canada Fund and Ivy Global
Natural Resources Fund), the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits each Fund's (with the exception of Ivy
Canada Fund and Ivy International Fund) total operating expenses
(excluding Rule 12b-1 fees, interest, taxes, brokerage
commissions, litigation, class-specific expenses, indemnification
expenses, and extraordinary expenses) to an annual rate of 1.95%
(1.50% in the case of Ivy International Fund II) of the Fund's
average net assets, which may lower that Fund's expenses and
increase its yield. Each Fund's expense limitation may be
terminated or revised at any time, at which time its expenses may
increase and its yield may be reduced.
On September 13, 1997, the Board (including a majority of
the Independent Trustees) (i) approved the continuance of the
Agreement with respect to Ivy China Region Fund, Ivy Global Fund,
Ivy International Fund, Ivy Latins America Strategy Fund and Ivy
Developing Nations Fund and (ii) approved the continuance of the
Management Agreement for Ivy Canada Fund. The initial term of
the Agreement (or the Management Agreement with respect to Ivy
Global Natural Resources Fund) between IMI and each of Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund, which commenced on January 1,
1997, will run for a period of two years from the date of
commencement. The initial term of the Agreement between IMI and
each of Ivy International Fund II and Ivy Pan-Europe Fund, which
commenced on May 13, 1997, will run for a period of two years
from the date of commencement. Each Agreement (or Management
Agreement, with respect to Ivy Canada Fund and Ivy Global Natural
Resources Fund) will continue in effect with respect to each Fund
from year to year, or for more than the initial period, as the
case may be, only so long as the continuance is specifically
approved at least annually (i) by the vote of a majority of the
Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the particular Fund or (b) by the vote of a majority
of the entire Board. If the question of continuance of the
Agreements (or adoption of any new agreement) is presented to
shareholders, continuance (or adoption) shall be effected only if
approved by the affirmative vote of a majority of the outstanding
voting securities of the particular Fund. See "Capitalization
and Voting Rights."
Each Agreement (or Management Agreement with respect to Ivy
Canada Fund and Ivy Global Natural Resources Fund) may be
terminated with respect to a particular Fund at any time, without
payment of any penalty, by the vote of a majority of the Board,
or by a vote of a majority of the outstanding voting securities
of that Fund, on 60 days' written notice to IMI, or by IMI on 60
days' written notice to the Trust. The Agreement shall terminate
automatically in the event of its assignment.
SUBADVISORY CONTRACT - IVY INTERNATIONAL FUND. The Trust
and IMI, on behalf of Ivy International Fund, have entered into a
subadvisory contract with an independent investment adviser (the
"Subadvisory Contract") under which the subadviser develops,
recommends and implements an investment program and strategy for
the Fund's portfolio and is responsible for making all portfolio
security and brokerage decisions, subject to the supervision of
IMI and, ultimately, the Board. Fees payable under the
Subadvisory Contract accrue daily and are paid quarterly by IMI.
Effective April 1, 1993, Northern Cross serves as subadviser for
Ivy International Fund's portfolio pursuant to the Subadvisory
Contract. As compensation for its services, Northern Cross is
paid a fee by IMI at the annual rate of 0.60% of Ivy
International Fund's average net assets. As compensation for
advisory services rendered for the fiscal years ended
December 31, 1995, 1996 and 1997, IMI paid Northern Cross
$2,369,074, $5,494,715 and $13,738,967, respectively. Northern
Cross, wholly-owned and operated by Hakan Castegren, is the
successor to the investment advisory functions of Boston Overseas
Investors, Inc. ("BOI"), which also was wholly-owned and operated
by Hakan Castegren. Boston Investor Services, Inc., the
successor to the administrative and research functions of BOI,
provides administrative and research services to Northern
Cross.
Any amendment to the current Subadvisory Contract requires
approval by votes of (a) a majority of the outstanding voting
securities of Ivy International Fund affected thereby and (b) a
majority of the Trustees who are not interested persons of the
Trust or of any other party to such Contract. The Subadvisory
Contract terminates automatically in the event of its assignment
(as defined in the 1940 Act) or upon termination of the
Agreement. Also, the Subadvisory Contract may be terminated by
not more than 60 days' nor less than 30 days' written notice by
either the Trust or IMI or upon not less than 120 days' notice by
the Subadviser. The Subadvisory Contract provides that IMI or
the Subadviser shall not be liable to the Trust, to any
shareholder of the Trust, or to any other person, except for loss
resulting from willful misfeasance, bad faith, gross negligence
or reckless disregard of duty.
The Subadvisory Contract will continue in effect (subject to
provisions for earlier termination as described above) only if
such continuance is approved at least annually (a) by a majority
of the Trustees who are not interested persons of the Trust or of
any other party to the Contract and (b) by either (i) a majority
of all of the Trustees of the Trust or (ii) a vote of a majority
of the outstanding voting securities of any Fund affected
thereby. On September 13, 1997, the Board, including a
majority of the Independent Trustees, last approved the
continuance of the Subadvisory Contract.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of Ivy Fund's shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on September 13, 1997. IMDI distributes shares of the
Funds through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the
Funds on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement, IMDI is entitled to
deduct a commission on all Class A Fund shares sold equal to the
difference, if any, between the public offering price, as set
forth in the Funds' then-current prospectus, and the net asset
value on which such price is based. Out of that commission, IMDI
may reallow to dealers such concession as IMDI may determine from
time to time. In addition, IMDI is entitled to deduct a CDSC on
the redemption of Class A shares sold without an initial sales
charge and Class B and Class C shares in accordance with, and in
the manner set forth in, the Prospectus.
Under the Distribution Agreement, each Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares [FN][Shares of
Ivy Canada Fund outstanding as of March 31, 1994 were designated
Class A shares of the Fund.] of Ivy Canada Fund $45,959, $85,131
and $38,002, respectively, in sales commissions, of which $7,824,
$12,272 and $5,470, respectively, was retained after dealers'
reallowances. During the fiscal years ended December 31, 1995,
1996 and 1997, IMDI received $2,387, $6,288 and $3,951,
respectively, in CDSCs on redemptions of Class B shares of the
Fund. During the period April 30, 1996 (commencement of sales of
Class C shares) to December 31, 1996 and during the fiscal year
ended December 31, 1997, IMDI received $295 and $9,106,
respectively, in CDSCs on redemptions of Class C shares of the
Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy China
Region Fund $132,337, $82,202 and $119,166, respectively, in
sales commissions, of which $9,919, $11,936 and $16,806,
respectively, was retained after dealers' reallowances. During
the fiscal years ended December 31, 1995, 1996 and 1997, IMDI
received $48,686, $46,514 and $54,467, respectively, in CDSCs on
redemptions of Class B shares of the Fund. During the period
April 30, 1996 (commencement of sales of Class C shares) to
December 31, 1996 and during the fiscal year ended December 31,
1997, IMDI received $46 and $3,825, respectively, in CDSCs on
redemptions of Class C shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A [FN][Shares of Ivy
Global Fund outstanding as of March 31, 1994 were designated
Class A shares of the Fund.] shares of Ivy Global Fund $150,828,
$130,266 and $74,515, respectively, in sales commissions, of
which $23,153, $23,164 and $10,387, respectively, was retained
after dealers' reallowances. During the fiscal years ended
December 31, 1995, 1996 and 1997, IMDI received $2,833, $9,991
and $35,120, respectively, in CDSCs on redemptions of Class B
shares of the Fund. During the period April 30, 1996
(commencement of sales of Class C shares) to December 31, 1996
and during the fiscal year ended December 31, 1997, IMDI received
CDSCs of $0 and $184, respectively, on redemptions of Class C
shares of the Fund.
During the period July 22, 1996 (commencement of operations)
to December 31, 1996 and during the fiscal year ended December
31, 1997, IMDI received from sales of Class A shares of Ivy
Global Science & Technology Fund $122,226 and $243,079,
respectively, in sales commissions, of which $16,160 and $32,035,
respectively, was retained after dealers' reallowances. During
the period July 22, 1996 (commencement of operations) to December
31, 1996 and during the fiscal year ended December 31, 1997, IMDI
received $338 and $13,617, respectively, in CDSCs on redemptions
of Class B shares of the Fund. During the period July 22, 1996
(commencement of operations) to December 31, 1996 and during the
fiscal year ended December 31, 1997, IMDI received CDSCs of $0
and $1,945, respectively, on redemptions of Class C shares of the
Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy
International Fund $931,967, $2,940,701 and $4,571,203,
respectively, in sales commissions, of which $144,220, $394,697
and $535,280, respectively, was retained after dealers' re-
allowances. During the fiscal years ended December 31, 1995,
1996 and 1997, IMDI received $102,532, $192,262 and $910,836,
respectively, in CDSCs paid upon certain redemptions of Class B
shares of Ivy International Fund. During the period April 30,
1996 (commencement of sales of Class C shares) to December 31,
1996 and during the fiscal year ended December 31, 1997, IMDI
received $943 and $54,778, respectively, in CDSCs on redemptions
of Class C shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy South
America Fund $65,204, $60,552 and $37,420, respectively, in sales
commissions, of which $8,435, $10,392 and $5,358, respectively,
was retained after dealers re-allowances. During the fiscal
years ended December 31, 1995, 1996 and 1997, IMDI received $447,
$1,116 and $13,727, respectively, in CDSCs on redemptions of
Class
B shares of the Fund. During the period April 30, 1996
(commencement of sales of Class C shares) to December 31, 1996
and during the fiscal year ended December 31, 1997, IMDI received
CDSCs of $0 and $57, respectively, on redemptions of Class C
shares of the Fund.
During the fiscal years ended December 31, 1995, 1996 and
1997, IMDI received from sales of Class A shares of Ivy
Developing Nations Fund $96,634, $195,128 and $107,131,
respectively, in sales commissions, of which $14,419, $28,765 and
$13,412, respectively, was retained after dealer re-allowances.
During the fiscal years ended December 31, 1995, 1996 and 1997,
IMDI received $813, $4,486 and $17,654, respectively, in CDSCs on
redemptions of Class B shares of the Fund. During the period
April 30, 1996 (commencement of sales of Class C shares) to
December 31, 1996 and during the fiscal year ended December 31,
1997, IMDI received CDSCs of $0 and $4,572, respectively, on
redemptions of Class C shares of the Fund.
During the fiscal year ended December 31, 1997, IMDI
received from sales of Class A shares of Ivy Asia Pacific Fund,
Ivy Global Natural Resources Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund
$28,616, $35,134, $766,150, $53,343 and $2,609, respectively, in
sales commissions, of which $3,127, $5,287, $64,357, $5,425 and
$418, respectively, was retained after dealer re-allowances.
During the fiscal year ended December 31, 1997, IMDI received in
CDSCs on redemptions of Class B shares of Ivy Asia Pacific Fund,
Ivy Global Natural Resources Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund $191,
$1,211, $23,690, $3,035 and $0, respectively. During the fiscal
year ended December 31, 1997, IMDI received in CDSCs on
redemptions of Class C shares of Ivy Asia Pacific Fund, Ivy
Global Natural Resources Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund $73,
$100, $12,004, $1,466 and $0, respectively.
Each Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of each Fund. Each Distribution Agreement may be terminated with
respect to a particular Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the particular
Fund or by a Fund by vote of either a majority of the outstanding
voting securities of the Fund or a majority of the Independent
Trustees on 60 days' written notice to IMDI. Each Distribution
Agreement shall terminate automatically in the event of its
assignment.
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of each Fund. At a
meeting held on February 8, 1997, the Board adopted the Rule 18f-
3 plan on behalf of Ivy Pan-Europe Fund. At a meeting held on
April 29, 1997, the Board adopted the Rule 18f-3 plan on behalf
of Ivy International Fund II. At a meeting held on December 5-6,
1997, the Board last approved the Rule 18f-3 plan. The key
features of the Rule 18f-3 plan are as follows: (i) shares of
each class of a Fund represent an equal pro rata interest in that
Fund and generally have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations,
qualifications, terms and conditions, except that each class
bears certain class-specific expenses and has separate voting
rights on certain matters that relate solely to that class or in
which the interests of shareholders of one class differ from the
interests of shareholders of another class; (ii) subject to
certain limitations described in the Prospectus, shares of a
particular class of a Fund may be exchanged for shares of the
same class of another Ivy fund; and (iii) a Fund's Class B shares
will convert automatically into Class A shares of that Fund after
a period of eight years, based on the relative net asset value of
such shares at the time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on
behalf of each Fund, in accordance with Rule 12b-1 under the 1940
Act, separate Rule 12b-1 distribution plans pertaining to the
Funds' Class A, Class B and Class C shares (each, a "Plan"). In
adopting each Plan, a majority of the Independent Trustees
concluded in accordance with the requirements of Rule 12b-1 that
there is a reasonable likelihood that each Plan will benefit each
Fund and its shareholders. The Trustees of the Trust believe
that the Plans should result in greater sales and/or fewer
redemptions of each Fund's shares, although it is impossible to
know for certain the level of sales and redemptions of a Fund's
shares in the absence of a Plan or under an alternative
distribution arrangement.
Under each Plan, each Fund pays IMDI a service fee, accrued
daily and paid monthly, at the annual rate of up to 0.25% of the
average daily net assets attributable to its Class A, Class B or
Class C shares, as the case may be. The services for which
service fees may be paid include, among other things, advising
clients or customers regarding the purchase, sale or retention of
shares of the Fund, answering routine inquiries concerning the
Fund and assisting shareholders in changing options or enrolling
in specific plans. Pursuant to each Plan, service fee payments
made out of or charged against the assets attributable to a
Fund's Class A, Class B or Class C shares must be in
reimbursement for services rendered for or on behalf of the
affected class. The expenses not reimbursed in any one month may
be reimbursed in a subsequent month. The Class A Plan (other
than the Class A Plan for Ivy Canada Fund) does not provide for
the payment of interest or carrying charges as distribution
expenses.
Under the Funds' Class B and Class C Plans, each Fund also
pays IMDI a distribution fee, accrued daily and paid monthly, at
the annual rate of 0.75% of the average daily net assets
attributable to its Class B or Class C shares. Ivy Canada Fund
also pays IMDI a distribution fee, accrued daily and paid
monthly, at the annual rate of 0.15% of the average daily assets
attributable to its Class A shares. IMDI may reallow to dealers
all or a portion of the service and distribution fees as IMDI may
determine from time to time. The distribution fee compensates
IMDI for expenses incurred in connection with activities
primarily intended to result in the sale of the Funds' Class B or
Class C shares (and Class A shares, in the case of Ivy Canada
Fund), including the printing of prospectuses and reports for
persons other than existing shareholders and the preparation,
printing and distribution of sales literature and advertising
materials. Pursuant to each Class B and Class C Plan (and Ivy
Canada Fund's Class A Plan), IMDI may include interest, carrying
or other finance charges in its calculation of distribution
expenses, if not prohibited from doing so pursuant to an order of
or a regulation adopted by the SEC.
Among other things, each Plan provides that (1) IMDI will
submit to the Board at least quarterly, and the Trustees will
review, written reports regarding all amounts expended under the
Plan and the purposes for which such expenditures were made;
(2) each Plan will continue in effect only so long as such
continuance is approved at least annually, and any material
amendment thereto is approved, by the votes of a majority of the
Board, including the Independent Trustees, cast in person at a
meeting called for that purpose; (3) payments by each Fund under
each Plan shall not be materially increased without the
affirmative vote of the holders of a majority of the outstanding
shares of the relevant class; and (4) while each Plan is in
effect, the selection and nomination of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust
shall be committed to the discretion of the Trustees who are not
"interested persons" of the Trust.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid (to MIMI, in the case of Ivy
Canada Fund and Ivy Global Natural Resources Fund) by a Fund.
IMDI also may make payments (such as the service fee payments
described above) to unaffiliated broker-dealers for services
rendered in the distribution of each Fund's shares. To qualify
for such payments, shares may be subject to a minimum holding
period. However, no such payments will be made to any dealer or
broker if at the end of each year the amount of shares held does
not exceed a minimum amount. The minimum holding period and
minimum level of holdings will be determined from time to time by
IMDI.
A report of the amount expended pursuant to each Plan, and
the purposes for which such expenditures were incurred, must be
made to the Board for its review at least quarterly.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Canada Fund paid IMDI $73,233, $68,732 and $50,833,
respectively, pursuant to its Class A plan. During the fiscal
years ended December 31, 1995, 1996 and 1997, Ivy Canada Fund
paid IMDI $8,964, $13,674 and $20,491, respectively, pursuant to
its Class B plan. During the period April 30, 1996 (the date on
which Class C shares of Ivy Canada Fund were first offered to the
public) to December 31, 1996 and during the fiscal year ended
December 31, 1997, Ivy Canada Fund paid IMDI $990 and $4,730,
respectively, pursuant to its Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy China Region Fund paid IMDI $32,647, $37,038 and
$41,927, respectively, pursuant to its Class A Plan. During the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy China
Region Fund paid IMDI $70,020, $84,812 and $99,827, respectively,
pursuant to its Class B Plan. During the period April 30, 1996
(the date on which Class C shares of Ivy China Region Fund were
first offered to the public) to December 31, 1996 and during the
fiscal year ended December 31, 1997, Ivy China Region Fund paid
IMDI $781 and $10,067, respectively, pursuant to its Class C
plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Global Fund paid IMDI $50,833, $59,251 and $64,567,
respectively, pursuant to its Class A plan. During the fiscal
years ended December 31, 1995, 1996 and 1997, the Fund paid IMDI
$36,632, $64,463 and $117,793, respectively, pursuant to its
Class B plan. During the period April 30, 1996 (the date on
which Class C shares of Ivy Global Fund were first offered to the
public) to December 31, 1996 and during the fiscal year ended
December 31, 1997, Ivy Global Fund paid IMDI $37 and $7,922,
respectively, pursuant to its Class C plan.
During the period July 22, 1996 (commencement of operations)
to December 31, 1996 and during the fiscal year ended December
31, 1997, Ivy Global Science & Technology Fund paid IMDI $3,592
and $28,111, respectively, pursuant to its Class A Plan, $4,377
and $63,671, respectively, pursuant to its Class B plan, and
$2,217 and $53,500, respectively, pursuant to its Class C plan.
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy International Fund paid IMDI $281,215, $1,671,153 and
$3,454,477, respectively, pursuant to its Class A Plan. For the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy
International Fund paid IMDI $474,670, $1,724,796 and $5,257,678,
respectively, pursuant to its Class B Plan. During the period
April 30, 1996 (the date on which Class C shares of Ivy
International Fund were first offered to the public) to December
31, 1996 and during the fiscal year ended December 31, 1997, Ivy
International Fund paid IMDI $100,898 and $1,487,376,
respectively, pursuant to its Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy South America Fund paid IMDI $2,637, $7,251 and
$14,065, respectively, pursuant to its Class A plan. During the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy South
America Fund paid IMDI $157, $3,855 and $33,776, respectively,
pursuant to its Class B plan. During the period April 30, 1996
(the date on which Class C shares of Ivy South America Fund were
first offered to the public) to December 31, 1996 and during the
fiscal year ended December 31, 1997, Ivy South America Fund paid
IMDI $317 and $4,244, respectively, pursuant to its Class C plan.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Developing Nations Fund paid IMDI $3,888, $17,525 and
$35,807, respectively, pursuant to its Class A plan. During the
fiscal years ended December 31, 1995, 1996 and 1997, the Fund
paid IMDI $4,160, $35,654 and $108,491, respectively, pursuant to
its Class B plan. During the period April 30, 1996 (the date on
which Class C shares of Ivy Developing Nations Fund were first
offered to the public) to December 31, 1996 and during the fiscal
year ended December 31, 1997, Ivy Developing Nations Fund paid
IMDI $3,360 and $32,590, respectively, pursuant to its Class C
plan.
During the fiscal year ended December 31, 1997, Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund paid IMDI $1,044, $10,462 and
$2,266, respectively, pursuant to its Class A plan. During the
fiscal year ended December 31, 1997, Ivy Asia Pacific Fund, Ivy
Global Natural Resources Fund, or Ivy International Small
Companies Fund paid IMDI $3,527, $21,463 and $6,742,
respectively, pursuant to its Class B plan. During the fiscal
year ended December 31, 1997, Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund, or Ivy International Small Companies Fund
paid IMDI $2,771, $890 and $11,992, respectively, pursuant to its
Class C plan. During the period from May 13, 1997 (commencement
of operations) to December 31, 1997 Ivy International Fund II and
Ivy Pan-Europe Fund paid IMDI $18,444 and $471, respectively,
pursuant to its Class A plan. During the period from May 13,
1997 (commencement of operations) to December 31, 1997 Ivy
International Fund II and Ivy Pan-Europe Fund paid IMDI $218,274
and $89, respectively, pursuant to its Class B plan. During the
period from May 13, 1997 (commencement of operations) to December
31, 1997 Ivy International Fund II and Ivy Pan-Europe Fund paid
IMDI $121,813 and $0, respectively, pursuant to its Class C plan.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Asia Pacific Fund: advertising, $66; printing and mailing of
prospectuses to persons other than current shareholders, $11,629;
compensation to dealers, $633; compensation to sales personnel,
$1,277; seminars and meetings, $158; travel and entertainment,
$121; general and administrative, $750; telephone, $33; and
occupancy and equipment rental, $89.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Asia Pacific Fund: advertising, $56; printing and mailing of
prospectuses to persons other than current shareholders, $11,075;
compensation to dealers, $3,661; compensation to sales personnel,
$1,173; seminars and meetings, $915; travel and entertainment,
$101; general and administrative, $657; telephone, $30; and
occupancy and equipment rental, $82.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Asia Pacific Fund: advertising, $57; printing and mailing of
prospectuses to persons other than current shareholders, $9,287;
compensation to dealers, $4,565; compensation to sales
personnel,$1,045; seminars and meetings, $1,141; travel and
entertainment, $105; general and administrative, $632; telephone,
$28; and occupancy and equipment rental, $72.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Canada Fund: advertising, $858; printing and mailing of
prospectuses to persons other than current shareholders, $6,143;
compensation to dealers, $7,091; compensation to sales personnel,
$27,483; seminars and meetings, $1,773; travel and entertainment,
$2,429; general and administrative, $21,460; telephone, $764; and
occupancy and equipment rental, $1,951.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Canada Fund: advertising, $143; printing and mailing of
prospectuses to persons other than current shareholders, $1,001;
compensation to dealers, $6,594; compensation to sales personnel,
$4,546; seminars and meetings, $1,649; travel and entertainment,
$400; general and administrative, $3,519; telephone, $126; and
occupancy and equipment rental, $323.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Canada Fund: advertising, $34; printing and mailing of
prospectuses to persons other than current shareholders, $240;
compensation to dealers, $2,014; compensation to sales
personnel,$1,070; seminars and meetings, $503; travel and
entertainment, $94; general and administrative, $836; telephone,
$30; and occupancy and equipment rental, $76.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
China Region Fund: advertising, $1,349; printing and mailing of
prospectuses to persons other than current shareholders, $10,737;
compensation to dealers, $8,859; compensation to sales personnel,
$38,284; seminars and meetings, $2,215; travel and entertainment,
$3,264; general and administrative, $26,999; telephone, $1,036;
and occupancy and equipment rental, $2,712.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
China Region Fund: advertising, $804; printing and mailing of
prospectuses to persons other than current shareholders, $6,427;
compensation to dealers, $34,214; compensation to sales
personnel, $22,915; seminars and meetings, $8,554; travel and
entertainment, $1,958; general and administrative, $16,239;
telephone, $621; and occupancy and equipment rental, $1,623.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
China Region Fund: advertising, $96; printing and mailing of
prospectuses to persons other than current shareholders, $730;
compensation to dealers, $6,782; compensation to sales personnel,
$2,602; seminars and meetings, $1,698; travel and entertainment,
$216; general and administrative, $1,731; telephone, $70; and
occupancy and equipment rental, $184.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Global Fund: advertising, $2,074; printing and mailing of
prospectuses to persons other than current shareholders, $7,895;
compensation to dealers, $18,685; compensation to sales
personnel, $57,749; seminars and meetings, $4,671; travel and
entertainment, $5,011; general and administrative, $40,996;
telephone, $1,568; and occupancy and equipment rental, $4,085.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Global Fund: advertising, $1,002; printing and mailing of
prospectuses to persons other than current shareholders, $3,663;
compensation to dealers, $43,604; compensation to sales
personnel, $27,329; seminars and meetings, $10,901; travel and
entertainment, $2,334; general and administrative, $18,823;
telephone, $736; and occupancy and equipment rental, $1,934.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Global Fund: advertising, $71; printing and mailing of
prospectuses to persons other than current shareholders, $261;
compensation to dealers, $4,517; compensation to sales personnel,
$1,940; seminars and meetings, $1,129; travel and entertainment,
$166; general and administrative, $1,341; telephone, $52; and
occupancy and equipment rental, $137.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Global Natural Resources Fund: advertising, $667; printing and
mailing of prospectuses to persons other than current
shareholders, $16,792; compensation to dealers, $5,925;
compensation to sales personnel, $12,738; seminars and meetings,
$1,481; travel and entertainment, $1,224; general and
administrative, $7,533; telephone, $338; and occupancy and
equipment rental, $884.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Global Natural Resources Fund: advertising, $365; printing and
mailing of prospectuses to persons other than current
shareholders, $9,224; compensation to dealers, $13,126;
compensation to sales personnel, $7,025; seminars and meetings,
$3,282; travel and entertainment, $667; general and
administrative, $4,133; telephone, $186; and occupancy and
equipment rental, $488.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Global Natural Resources Fund: advertising, $16; printing and
mailing of prospectuses to persons other than current
shareholders, $399; compensation to dealers, $819; compensation
to sales personnel, $298; seminars and meetings, $205; travel and
entertainment, $50; general and administrative, $179; telephone,
$8; and occupancy and equipment rental, $21.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Global Science & Technology Fund: advertising, $1,255; printing
and mailing of prospectuses to persons other than current
shareholders, $16,224; compensation to dealers, $9,513;
compensation to sales personnel, $27,968; seminars and meetings,
$2,378; travel and entertainment, $2,432; general and
administrative, $16,860; telephone, $733; and occupancy and
equipment rental, $1,962.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Global Science & Technology Fund: advertising, $726; printing
and mailing of prospectuses to persons other than current
shareholders, $8,702; compensation to dealers, $35,704;
compensation to sales personnel, $16,276; seminars and meetings,
$8,926; travel and entertainment, $1,391; general and
administrative, $9,658; telephone, $425; and occupancy and
equipment rental, $1,143.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Global Science & Technology Fund: advertising, $621; printing
and mailing of prospectuses to persons other than current
shareholders, $7,777; compensation to dealers, $38,708;
compensation to sales personnel, $13,856; seminars and meetings,
$9,677; travel and entertainment, $1,197; general and
administrative, $8,299; telephone, $363; and occupancy and
equipment rental, $972.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, IMDI expended the following
amounts in marketing Class A shares of Ivy International Fund II:
advertising, $1,060; printing and mailing of prospectuses to
persons other than current shareholders, $16,952; compensation to
dealers, $4,148; compensation to sales personnel, $24,893;
seminars and meetings, $1,037; travel and entertainment, $1,867;
general and administrative, $13,129; telephone, $625; and
occupancy and equipment rental, $1,760.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, IMDI expended the following
amounts in marketing Class B shares of Ivy International Fund II:
advertising, $3,276; printing and mailing of prospectuses to
persons other than current shareholders, $52,365; compensation to
dealers, $206,761; compensation to sales personnel, $76,896;
seminars and meetings, $51,690; travel and entertainment, $5,768;
general and administrative, $40,556; telephone, $1,930; and
occupancy and equipment rental, $5,438.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, IMDI expended the following
amounts in marketing Class C shares of Ivy International Fund II:
advertising, $1,806; printing and mailing of prospectuses to
persons other than current shareholders, $28,876; compensation to
dealers, $152,360; compensation to sales personnel, $42,403;
seminars and meetings, $38,090; travel and entertainment, $3,181;
general and administrative, $22,364; telephone, $1,064; and
occupancy and equipment rental, $2,999.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
International Fund: advertising, $158,860; printing and mailing
of prospectuses to persons other than current shareholders,
$429,373; compensation to dealers, $1,253,172; compensation to
sales personnel, $3,907,092; seminars and meetings, $313,293;
travel and entertainment, $328,189; general and administrative,
$2,455,783; telephone, $102,891; and occupancy and equipment
rental, $275,579.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
International Fund: advertising, $51,897; printing and mailing
of prospectuses to persons other than current shareholders,
$141,085; compensation to dealers, $2,476,536; compensation to
sales personnel,$1,279,048; seminars and meetings, $619,134;
travel and entertainment, $107,940; general and administrative,
$809,589; telephone, $33,752; and occupancy and equipment rental,
$90,204.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
International Fund: advertising, $15,545; printing and mailing
of prospectuses to persons other than current shareholders,
$41,649; compensation to dealers, $1,060,244; compensation to
sales personnel,$381,130; seminars and meetings, $265,061; travel
and entertainment, $31,787; general and administrative, $287,010;
telephone, $10,006; and occupancy and equipment rental, $26,887.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
International Small Companies Fund: advertising, $138; printing
and mailing of prospectuses to persons other than current
shareholders, $6,676; compensation to dealers, $1,654;
compensation to sales personnel,$2,722; seminars and meetings,
$413; travel and entertainment, $251; general and administrative,
$1,577; telephone, $72; and occupancy and equipment rental, $190.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
International Small Companies Fund: advertising, $103; printing
and mailing of prospectuses to persons other than current
shareholders, $5,042; compensation to dealers, $4,876;
compensation to sales personnel, $2,060; seminars and meetings,
$1,219; travel and entertainment, $189; general and
administrative, $1,191; telephone, $54; and occupancy and
equipment rental, $143.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
International Small Companies Fund: advertising, $212; printing
and mailing of prospectuses to persons other than current
shareholders, $10,149; compensation to dealers, $11,255;
compensation to sales personnel,$4,083; seminars and meetings,
$2,814; travel and entertainment, $387; general and
administrative, $2,398; telephone, $108; and occupancy and
equipment rental, $284.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
South America Fund: advertising, $533; printing and mailing of
prospectuses to persons other than current shareholders, $3,585;
compensation to dealers, $5,340; compensation to sales personnel,
$13,244; seminars and meetings, $1,335; travel and entertainment,
$1,129; general and administrative, $8,527; telephone, $351; and
occupancy and equipment rental, $934.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
South America Fund: advertising, $323; printing and mailing of
prospectuses to persons other than current shareholders, $2,207;
compensation to dealers, $14,248; compensation to sales
personnel,$8,049; seminars and meetings, $3,562; travel and
entertainment, $690; general and administrative, $5,222;
telephone, $214; and occupancy and equipment rental, $567.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
South America Fund: advertising, $44; printing and mailing of
prospectuses to persons other than current shareholders, $275;
compensation to dealers, $2,827; compensation to sales
personnel,$1,075; seminars and meetings, $707; travel and
entertainment, $90; general and administrative, $671; telephone,
$28; and occupancy and equipment rental, $76.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class A shares of Ivy
Developing Nations Fund: advertising, $1,357; printing and
mailing of prospectuses to persons other than current
shareholders, $14,809; compensation to dealers, $14,897;
compensation to sales personnel,$32,914; seminars and meetings,
$3,724; travel and entertainment, $2,851; general and
administrative, $21,201; telephone, $874; and occupancy and
equipment rental, $2,318.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class B shares of Ivy
Developing Nations Fund: advertising, $1,073; printing and
mailing of prospectuses to persons other than current
shareholders, $11,351; compensation to dealers, $42,006;
compensation to sales personnel,$25,931; seminars and meetings,
$10,502; travel and entertainment, $2,214; general and
administrative, $16,388; telephone, $686; and occupancy and
equipment rental, $1,826.
During the fiscal year ended December 31, 1997, IMDI
expended the following amounts in marketing Class C shares of Ivy
Developing Nations Fund: advertising, $317; printing and mailing
of prospectuses to persons other than current shareholders,
$3,419; compensation to dealers, $16,459; compensation to sales
personnel,$7,695; seminars and meetings, $4,115; travel and
entertainment, $662; general and administrative, $4,914;
telephone, $204; and occupancy and equipment rental, $542.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, IMDI expended the following
amounts in marketing Class A shares of Ivy Pan-Europe Fund:
advertising, $30; printing and mailing of prospectuses to persons
other than current shareholders, $1,522; compensation to dealers,
$123; compensation to sales personnel, $698; seminars and
meetings, $31; travel and entertainment, $52; general and
administrative, $368; telephone, $18; and occupancy and equipment
rental, $49.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, IMDI expended the following
amounts in marketing Class B shares of Ivy Pan-Europe Fund:
advertising, $2; printing and mailing of prospectuses to persons
other than current shareholders, $84; compensation to dealers,
$262; compensation to sales personnel, $39; seminars and
meetings, $66; travel and entertainment, $3; general and
administrative, $20; telephone, $1; and occupancy and equipment
rental, $3.
Each Plan may be amended at any time with respect to the
class of shares of the Fund to which the Plan relates by vote of
the Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of considering
such amendment. Each Plan may be terminated at any time with
respect to the class of shares of the particular Fund to which
the Plan relates, without payment of any penalty, by vote of a
majority of the Independent Trustees, or by vote of a majority of
the outstanding voting securities of that class.
If the Distribution Agreement or the Distribution Plans are
terminated (or not renewed) with respect to any of the Ivy funds
(or class of shares thereof), each may continue in effect with
respect to any other fund (or Class of shares thereof) as to
which they have not been terminated (or have been renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109, maintains custody of the
assets of each Fund held in the United States. Under the
Custodian Agreement, the Custodian also provides certain
financial services for Ivy International Fund, including
bookkeeping, computation of daily net asset value, maintenance of
income, expense and brokerage records, and provision of all
information required by the Trust in order to satisfy its
reporting and filing requirements. Rules adopted under the 1940
Act permit the Trust to maintain its foreign securities (Canadian
securities, with respect to Ivy Canada Fund and Ivy Global
Natural Resources Fund) and cash in the custody of certain
eligible foreign banks and securities depositories (and certain
eligible Canadian banks and securities depositories, with respect
to Ivy Canada Fund and Ivy Global Natural Resources Fund).
Pursuant to those rules, the Custodian has entered into
subcustodial agreements for the holding of each Fund's foreign
securities (and for the holding of Ivy Canada Fund's and Ivy
Global Natural Resources Fund's non-Canadian foreign securities).
Similarly, pursuant to those rules, Ivy Canada Fund's and Ivy
Global Natural Resources Fund's portfolio securities and cash,
when invested in Canadian securities, will be held by its Sub-
custodian, The Bank of Nova Scotia. With respect to each Fund,
except for Ivy Canada Fund and Ivy Global Natural Resources Fund,
the Custodian may receive, as partial payment for its services to
such Funds, a portion of the Trust's brokerage business, subject
to its ability to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for the Funds.
As compensation for those services, each Fund pays MIMI a monthly
fee plus out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of a Fund at the preceding month end at
the following rates: $1,250 when net assets are $10 million and
under; $2,500 when net assets are over $10 million to $40
million; $5,000 when net assets are over $40 million to $75
million; and $6,500 when net assets are over $75 million.
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Canada Fund paid MIMI $32,399, 33,091 and $35,010,
respectively, under the agreement. During the fiscal years ended
December 31, 1995, 1996 and 1997, Ivy China Region Fund paid MIMI
$32,653, $35,038 and $14,277, respectively, under the agreement.
For the fiscal years ended December 31, 1995, 1996 and 1997, Ivy
Global Fund paid MIMI $32,982, 34,802 and $37,169, respectively,
under the agreement. During the period from July 22, 1996
(commencement of operations) to December 31, 1996 and during the
fiscal year ended December 31, 1997, Ivy Global Science &
Technology Fund paid MIMI $9,171 and $36,454, respectively, under
the agreement. For the fiscal years ended December 31, 1995,
1996 and 1997, Ivy International Fund paid MIMI $91,612, $173,986
and $171,582, respectively, under the agreement. During the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy South
America Fund paid MIMI $15,094, $16,731 and $24,860,
respectively, under the agreement. During the fiscal years ended
December 31, 1995, 1996 and 1997, Ivy Developing Nations Fund
paid MIMI $15,112, $25,951 and $37,378, respectively, under the
agreement. During the fiscal year ended December 31, 1997, Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund paid MIMI $18,400, $18,506,
and $18,633, respectively, under the agreement. For the period
from May 13, 1997 (commencement of operations) to December 31,
1997, Ivy International Fund II and Ivy Pan-Europe Fund paid MIMI
$4,317 and $11,543, respectively, under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service
Agreement, IMSC, a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Each Fund (except for the Class I
Funds with respect to their Class I shares) pays a monthly fee at
an annual rate of $20.00 for each open Class A, Class B and Class
C account. The Class I Funds pay $10.25 per open Class I
account. In addition, each Fund pays a monthly fee at an annual
rate of $4.58 per account that is closed plus certain out-of-
pocket expenses. Such fees and expenses for the fiscal year
ended December 31, 1997 for Ivy Asia Pacific Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Fund, Ivy
International Small Companies Fund and Ivy South America Fund
totalled $2,346, $77,371, $100,600, $75,714, $9,520, $45,539,
$3,166,932, $7,433, $22,139 and $67,307, respectively. Such fees
and expenses for the period from May 13, 1997 (commencement of
operations) to December 31, 1997 for Ivy International Fund II
and Ivy Pan-Europe Fund totalled $84,604 and $416, respectively.
Certain broker-dealers that maintain shareholder accounts with a
Fund through an omnibus account provide transfer agent and other
shareholder-related services that would otherwise be provided by
IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly. IMSC pays such
broker-dealers a per account fee for each open account within the
omnibus account, or a fixed rate (e.g., .10%) fee, based on the
average daily net asset value of the omnibus account (or a
combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI
provides certain administrative services to each Fund. As
compensation for these services, each Fund (except for the Class
I Funds with respect to their Class I shares) pays MIMI a monthly
fee at the annual rate of .10% of that Fund's average daily net
assets. The Class I Funds pay MIMI a monthly fee at the annual
rate of .01% of its average daily net assets for Class I. Such
fees for the fiscal year ended December 31, 1997 for Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund and Ivy Global Science & Technology Fund, Ivy
International Fund, Ivy International Small Companies Fund and
Ivy South America Fund totalled $1,047, $15,230, $27,760,
$38,398, $6,411, $22,962, $2,211,426, $2,880, $9,428 and
$28,429, respectively. Such fees and expenses for the period
from May 13, 1997 (commencement of operations) to December 31,
1997 for Ivy International Fund II and Ivy Pan-Europe Fund
totalled $41,386 and $198, respectively.
Outside of providing administrative services to the Trust,
as described above, MIMI may also act on behalf of IMDI in paying
commissions to broker-dealers with respect to sales of Class B
and Class C shares of each Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public
accountants, has been selected as auditors for the Trust. The
audit services performed by Coopers & Lybrand L.L.P., include
audits of the annual financial statements of each of the funds of
the Trust. Other services provided principally relate to filings
with the SEC and the preparation of the funds' tax returns.
Year 2000 Risks. The services provided to the Funds by IMI,
MFC, Northern Cross, MIMI and the Funds' other service providers
are dependent on those service providers' computer systems. Many
computer software and hardware systems in use today cannot
distinguish between the year 2000 and the year 1900 because of
the way dates are encoded and calculated (the "Year 2000
Problem"). The failure to make this distinction could have a
negative implication on handling securities trades, pricing and
account services. IMI, MFC, Northern Cross, MIMI and the Funds'
other service providers are taking steps that each believes are
reasonably designed to address the Year 2000 Problem with respect
to the computer systems that they use. The Funds believe these
steps will be sufficient to avoid any material adverse impact on
the Funds. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the
Funds.
CAPITALIZATION AND VOTING RIGHTS
Ivy Canada Fund results from a reorganization of Mackenzie
Canada Fund, a series of the Company, which reorganization was
approved by shareholders on January 27, 1995. Ivy Global Fund
results from a reorganization of Mackenzie Global Fund, which
reorganization was approved by shareholders on January 27, 1995.
The capitalization of the Trust consists of an unlimited number
of shares of beneficial interest (no par value per share). When
issued, shares of each class of each Fund are fully paid, non-
assessable, redeemable and fully transferable. No class of
shares of a Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust permits the
Trustees to create separate series or portfolios and to divide
any series or portfolio into one or more classes. The Trustees
have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for Ivy International Fund and Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class
shares for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy US Emerging Growth Fund (formerly Ivy
Emerging Growth Fund until January 15, 1998), Ivy Global Fund,
Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund II, Ivy High Yield Fund (formerly Ivy
International Bond Fund until January 28, 1998), Ivy South
America Fund (formerly Ivy Latin America Strategy Fund until
January 15, 1998), Ivy Developing Nations Fund (formerly Ivy New
Century Fund until January 15, 1998) and Ivy Pan-Europe Fund, as
well as Class I shares for Ivy Bond Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy High Yield Fund and Ivy International Small Companies
Fund.
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on matters
that only affect the Fund. All classes of shares of the Fund
will vote together, except with respect to the distribution plan
applicable to the Fund's Class A, Class B or Class C shares or
when a class vote is required by the 1940 Act. On matters
relating to all funds of the Trust, but affecting the funds
differently, separate votes by the shareholders of each fund are
required. Approval of an investment advisory agreement and a
change in fundamental policies would be regarded as matters
requiring separate voting by the shareholders of each fund of the
Trust. If the Trustees determine that a matter does not affect
the interests of a fund, then the shareholders of that fund will
not be entitled to vote on that matter. Matters that affect the
Trust in general, such as ratification of the selection of
independent public accountants, will be voted upon collectively
by the shareholders of all funds of the Trust.
As used in this SAI and the Prospectus, the phrase "majority
vote of the outstanding shares" of a Fund means the vote of the
lesser of: (1) 67% of the shares of that Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of that Fund (or of the
Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by a Fund, the matter shall have
been effectively acted upon with respect to that Fund if a
majority of the outstanding voting securities of that Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 26(c) of the Act were
applicable.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A shares, except that of the outstanding
Class A shares of Ivy Asia Pacific Fund, Donaldson Lufkin
Jenrette Securities Corporation Inc.,
P.O. Box 2052, Jersey City, New Jersey 07303, owned of record
166,675.677 shares (38.07%)
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksosville, Florida 32246, owned of record
58,511.309 shares (13.36%); and except that of the outstanding
Class A shares of Ivy China Region Fund, Resources Trust Co.,
P.O. Box 3865, Englewood Co., 80155-3865, owned of record
465,869.596 shares (22.29%); and except that of the outstanding
Class A shares of Ivy Developing Nations Fund, Fleet National
Bank, P.O. Box 92800, Rochester , New York 14692-8900 owned of
record 73,245.436 shares (6.67%) and Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive East,3rd Floor, Jacksonville,
Florida 32246, owned of record 60,819.294 shares (5.54%); and
except that of the outstanding Class A shares of Ivy Global
Natural Resources Fund, Carn & Co., P.O. Box 96211 Washington, DC
20090-6211, owned of record 81,267.566 shares (29.08%), and First
Union National Bank, 1525 West WT Harris Blvd, Charotte, NC
28288-1151, owned of record 22,922.529 shares (8.20%); and except
that of outstanding Class A shares of Ivy Global Science &
Technology Fund , Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, New Jersey 07303,
owned of record 165,274.369 shares (24.09%), and Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive,3rd Floor,
Jacksonville , Florida 32246, owned of record 35,974.163 shares
(5.24%); and except that of the outstanding Class A shares of Ivy
International Fund, Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California 94104, owned of record
15,517,777.019 shares (35.16%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 5,304,142.077 shares (12.01%); and
except that of the outstanding Class A shares of Ivy
International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive, 3rd Floor, Jacksonville, Florida 32246, owned of
record 805,245.736 shares (33.37%); and except that of the
outstanding Class A shares of Ivy International Small Companies
Fund, Donaldson Lufkin Jenrette Securities Corporation Inc., P.O.
Box 2052, Jersey City, New Jersey 07303, owned of record
19,407.118 shares (17.75%), Mackenzie Investment Management Inc.,
700 S. Federal Hwy., Suite 300, Boca Raton, FL 33432, owned of
record 10,102.416 shares (9.24%), and Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive, 3rd Floor, Jacksonville, Florida
32246, owned of record 8,388.029 shares (7.67%); and except that
the outstanding Class A shares of Ivy Pan-Europe Fund, Mackenzie
Investment Management Inc., 700 S. Federal Hwy., Boca Raton, FL
33432, owned of record 37,553.145 shares (25.51%), Pacific
Century Trust, P.O. Box 888, Honolulu, HI, 96808- 0888, owned of
record 41,238.142 shares (28.00%), and Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 18,419.996 shares
(12.51); and except that of the outstanding Class A shares of
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 48,763.532 (12.14%), and FTC & Co., P.O. Box
173736, Denver, CO 80202 owned of record 25,251.702 (6.29%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class B shares, except that of the outstanding
Class B shares of the Ivy Asia Pacific Fund, Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 94,518.384 shares
(30.97%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, New Jersey 07303, owned of
record 32,529.941 shares (10.66%); and except that of the
outstanding Class B shares of Ivy Canada Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 33,426.107 shares
(12.99%), and JW Charles Clearing Corp, FBO Joseph Zerger IRA,
1550 E. Oakland Park Blvd., Fort Lauderdale, FL 33334, owned of
record 19,465.982 shares (7.56%) and Janet K Nichol,Trustee, 4440
Arch St., San Diego CA 92116 owned of record 13,769.993 shares
(5.35%); and that of the outstanding Class B shares of the Ivy
China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246, owned of
record 152,548.533 shares (14.68%); and that of the outstanding
Class B shares of Ivy Developing Nations Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 411,118.769 shares
(32.96%); and that of the outstanding Class B shares of the Ivy
Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, Florida 32246, owned of
record 84,896.525 shares (10.46%); and that of the outstanding
Class B shares of the Ivy Global Natural Resources Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, Florida 32246, owned of record 104,611.624
shares (41.64%); and except that of the outstanding Class B
shares of the Ivy International Fund, Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 6,666,653.322 shares (46.54%); and
except that of the outstanding Class B shares of the Ivy
International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 4,609,455.833 shares (64.15%); and except that of
the outstanding Class B shares of Ivy International Small
Companies Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246, owned of
record 27,519.468 shares (23.33%); and except that of the
outstanding Class B shares of Ivy Pan-Europe Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 22,948.768 shares
(36.14%), Pedodontic Asso. Inc.,4211 Haialae Ave., Suite 405,
Honolulu HI 96816-5317, owned of record 10,964.806 shases
(17.26%), Community National Bank, P.O. Box 210, 210 Main Street,
Seneca, KS 66538, owned of record 5,248.619 shares (8.26%), and
Wedbush Morgan Securities, 1000 Wilshire Blvd., Los Angeles, CA
91506, owned of record 5,080.145 shares (8.00%); and except that
of the outstanding Class B shares of Ivy South America Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, Florida 32246, owned of record
103,513.751 shares (37.49%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class C shares, except that of the outstanding
Class C shares of Ivy Canada Fund, Francisco Rodriguez Carrreras
& Louis Rodriguez Aguilar JT TEN c/o Zarlene Imports, 1550
Oakland Park Blvd., Fort Lauderdale, FL 33334-4425, owned of
record 22,667.623 shares (36.29%), Francisco Rodriguez Carrreras
& Fuensanta Rosario Rodriguez Aguilar JT TEN c/o Zarlene Imports,
1550 Oakland Park Blvd., Fort Lauderdale, FL 33334-4425, owned of
record 15,118.227 shares (24.20%), JW Charles Clearing Corp, FBO
Giancarlo Dimizio IRA, 4900 N. Ocean Blvd. #1107, Fort
Lauderdale, FL 33308, owned of record 4,980.896 shares (7.97%),
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 4,784.434
shares (7.66%) and Alma R. Buncsak TTEE, 745 Cherokee Path, Lake
Mills, WI 53551, owned of record 3,755.491 shares (6.01%); and
that of the outstanding Class C shares of the Ivy China Region
Fund, The Ohio Company FBO Gerald Mansbach c/o Mansbach Metal,
155 E. Broad Street,.Columbus, OH 43215, owned of record
26,790.606 shares (16.92%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 42,593.930 shares (26.91%); and
that of the outstanding Class C shares of Ivy Developing Nations
Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida 32246, owned of record
98,801.371 shares (29.38%); and that of the outstanding Class C
shares of Ivy Global Fund, The Ohio Company FBO Gerald Mansbach
c/o Mansbach Metal, 155 E. Broad Street, Columbus, OH 43215,
owned of record 21,273.701 shares (29.64%), Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 14,219.372 shares
(19.81%), Linda Powers Kunze TOD John Kunze, 10214 Old Orchard,
Brecksville, OH 44141, owned of record 4,101.874 shares (5.71%),
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 4,074.171
shares (5.67%), and Smith Barney Inc., owned of record 3,694.890
shares (5.14%); and that of the outstanding Class C shares of the
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 5,941.467 shares (41.26%),
Katherine P Ralston & James W Ralston, 609 Hwy. 466, Lady Lake,
FL 32159, owned of record 1,171.068 shares (8.13%), Anthony L
Bassano & Marie E Bassano, 8934 Bari Court, Port Richey, FL
34668, owned of record 1,087.337 shares (7.55%), Donald W Nelson
MD & Joanna R Nelson, 5015 NW 127th Street, Vancouver, WA 98685,
owned of record 1,048.526 shares (7.28%), and Raymond James &
Associates, Inc. CUST for Diversified Dental P/S, 10641 1st
Street E, Suite 204, Treasure Island, FL 33706, owned of record
903.508 shares (6.27%); and except that of the outstanding Class
C shares of Ivy Global Science & Technology Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 33,116.039 shares
(8.54%); and except that of the outstanding Class C shares of the
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 2,897,728.850 shares (65.96%); and except that
of the outstanding Class C shares of the Ivy International Fund
II, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida 32246, owned of record
2,910,639.915 shares (78.82%); and except that of the outstanding
Class C shares of the Ivy International Small Companies Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, Florida 32246, owned of record
127,274.020 shares (71.36%), and The Ohio Company FBO Gerald
Mansbach c/o Mansbach Metal, 155 East Broad Street, Columbus, OH
45459, owned of record 24,831.652 shares (13.92%); and except
that of the outstanding Class C shares of Ivy Pan-Europe Fund,
Pacific Century Trust, P.O. Box 3170, Honolulu, HI 86802-3170,
owned of record 45,784.705 shares (79.88%), and Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 6,743.781 shares
(11.76%); and except that of the outstanding Class C shares of
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 30,277.533 shares (73.26%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City,
New Jersey 07303, owned of record 2,257.262 shares (5.46%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class I shares, except that of the outstanding
Class I shares of Ivy International Fund, The John E. Fetzer
Institute Inc., 9292 W. KL Avenue, Kalamazoo, MI 49009, owned of
record 621,454.124 shares (21.38%), Lynspen And Company, 420
North 20th Street, Birmingham, AL 35203, owned of record
347,976.439 shares (11.97%), State Street Bank, 200 Newport Ave.,
7th Floor, North Quincy, MA 02171, owned of record 282,832.022
shares (9.73%), Enele Co., 1211 SW 5th Ave., Portland,OR 97204,
owned of record 202,171.320 shares (6.95%), David & Co., P.O.
Box 188, Murfreesboro, TN 37133-0188, owned of record 172,994.958
shares (5.95%), and S. Mark Taper Foundation, 12011 San Vicente
Blvd., Suite 400, Los Angeles, CA 90049, owned of record
156,138.797 shares (5.37%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Advisor Class shares, except that of the
outstanding Advisor Class shares of Ivy China Region Fund,
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 1,527.694
shares (99.99%); except that of the outstanding Advisor Class
shares of Ivy International Fund II, Charles Schwab & Co.Inc.,
owned of record 14,512.325 shares (63.83%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City,
New Jersey 07303, owned of record 8,220.177 shares (36.15%); and
except that of the outstanding Advisor Class shares of Ivy
Pan-Europe Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, New Jersey 07303, owned of
record 2,087.343 shares (99.98%).
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of a Fund held personally liable
for the obligations of that Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
NET ASSET VALUE
The net asset value per share of a Fund is computed by
dividing the value of the Fund's aggregate net assets (i.e., its
total assets less its liabilities) by the number of the Fund's
shares outstanding. For purposes of determining a Fund's
aggregate net assets, receivables are valued at their realizable
amounts. A Fund's liabilities, if not identifiable as belonging
to a particular class of the Fund, are allocated among the Fund's
several classes based on their relative net asset size.
Liabilities attributable to a particular class are charged to
that class directly. The total liabilities for a class are then
deducted from the class's proportionate interest in the Fund's
assets, and the resulting amount is divided by the number of
shares of the class outstanding to produce its net asset value
per share.
A security listed or traded on a recognized stock exchange
or The Nasdaq Stock Market Inc. ("Nasdaq") is valued at the
security's last sale price on the exchange on which the security
is principally traded. If no sale is reported at that time, the
average between the current bid and asked price is used. The
value of a foreign security is determined in its national
currency as of the normal close of trading on the foreign
exchange on which it is traded or as of the close of regular
trading on the Exchange, if that is earlier, and that value is
then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined. All other
securities for which OTC market quotations are readily available
are valued at the average between the current bid and asked
price.
Debt securities normally are valued on the basis of quotes
obtained from brokers and dealers (or pricing services that take
into account appropriate valuation factors). Interest is accrued
daily. Money market instruments are valued at amortized cost,
which the Board believes approximates market value. Options are
valued at the last sale price on the exchange on which they
principally are traded, if available, and otherwise are valued at
the last offering price, in the case of written options, and the
last bid price, in the case of purchased options. Exchange
listed and widely-traded OTC futures (and options thereon) are
valued at the most recent settlement price. Securities and other
assets for which market prices are not readily available are
valued at fair value as determined by IMI and approved by the
Board. Trading in securities on European and Far Eastern
securities exchanges is normally completed before the close of
regular trading on the Exchange. Trading on these foreign
exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of
the national business holidays identified above). If events
materially affecting the value of a Fund's portfolio securities
occur between the time when these foreign exchanges close and the
time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and
approved by the Board.
Portfolio securities are valued (and net asset value per
share is determined) as of the close of regular trading on the
Exchange (normally 4:00 p.m., eastern time) on each day the
Exchange is open for trading. The Exchange and the Trust's
offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On those days when either or both of the
Funds' Custodian or the Exchange close early as a result of a
partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption
requests must be received.
The sale of a Fund's shares will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the Fund's best
interest to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to
have above average potential for capital appreciation. Common
stocks are disposed of in situations where it is believed that
potential for such appreciation has lessened or that other common
stocks have a greater potential. Therefore, a Fund may purchase
and sell securities without regard to the length of time the
security is to be, or has been, held. A change in securities
held by a Fund is known as "portfolio turnover" and may involve
the payment by that Fund of dealer markup or underwriting
commission and other transaction costs on the sale of securities,
as well as on the reinvestment of the proceeds in other
securities. A Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities
for the most recently completed fiscal year by the monthly
average of the value of the portfolio securities owned by the
Fund during that year. For purposes of determining a Fund's
portfolio turnover rate, all securities whose maturities at the
time of acquisition were one year or less are excluded. The
annual portfolio turnover rates for the Funds are provided in the
Prospectus under "The Funds' Financial Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC, less any applicable CDSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the
value of its net assets, or (iii) for such other periods as the
SEC may by order permit for the protection of shareholders of a
Fund.
Under unusual circumstances, when the Board deems it in the
best interest of a Fund's shareholders, the Fund may make payment
for shares repurchased or redeemed in whole or in part in
securities of that Fund taken at current values. If any such
redemption in kind is to be made, each Fund may make an election
pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of that Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those accounts of shareholders who have
maintained an investment, including sales charges paid, of less
than $1,000 in a Fund for a period of more than 12 months. All
accounts below that minimum will be redeemed simultaneously when
MIMI deems it advisable. The $1,000 balance will be determined
by actual dollar amounts invested by the shareholder, unaffected
by market fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to redeem such
account, and the shareholder shall have 60 days from the date of
such letter to invest such additional sums as shall raise the
value of such account above that minimum. Should the shareholder
fail to forward such sum within 60 days of the date of the
Trust's letter of notification, the Trust will redeem the shares
held in such account and transmit the redemption in value thereof
to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by a Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require
personal identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions, a
Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of each Fund
will automatically convert to Class A shares of the respective
Fund, based on the relative net asset values per share of the two
classes, no later than the month following the eighth anniversary
of the initial issuance of such Class B shares of the particular
Fund occurs. For the purpose of calculating the holding period
required for conversion of Class B shares, the date of initial
issuance shall mean: (1) the date on which such Class B shares
were issued, or (2) for Class B shares obtained through an
exchange, or a series of exchanges, (subject to the exchange
privileges for Class B shares) the date on which the original
Class B shares were issued. For purposes of conversion of
Class B shares, Class B shares purchased through the reinvestment
of dividends and capital gain distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time
any Class B shares in the shareholder's regular account (other
than those shares in the sub-account) convert to Class A shares,
a pro rata portion of the Class B shares in the sub-account will
also convert to Class A shares. The portion will be determined
by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares
not acquired through the reinvestment of dividends and capital
gain distributions.
TAXATION
The following is a general discussion of certain tax rules
thought to be applicable with respect to the Funds. It is merely
a summary and is not an exhaustive discussion of all possible
situations or of all potentially applicable taxes. Accordingly,
shareholders and prospective shareholders should consult a
competent tax adviser about the tax consequences to them of
investing in the Funds.
Each Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, each Fund
must, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale
or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the particular Fund's assets is
represented by cash, U.S. Government securities, the securities
of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the particular
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, each Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
each Fund must distribute during each calendar year (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the particular Fund in October, November or
December of the year with a record date in such a month and paid
by that Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar
year the distributions are declared, rather than the calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or
call option is not included in income at the time of receipt. If
the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by a Fund is exercised, thereby requiring the
Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will
be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which a Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by a Fund at the
end of each taxable year (and on certain other dates prescribed
in the Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for Federal income
tax purposes. The straddle rules may affect the character of
gains or losses realized by a Fund. In addition, losses realized
by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in
which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the
consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term
capital gain realized by a Fund, which is taxed as ordinary
income when distributed to shareholders.
A Fund may make one or more of the elections available under
the Code which are applicable to straddles. If a Fund makes any
of the elections, the amount, character and timing of the
recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain options,
futures and forward contracts, gains or losses attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to
its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross
income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which a Fund held the PFIC shares. A Fund
itself will be subject to tax on the portion, if any, of an
excess distribution that is so allocated to prior Fund taxable
years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, a Fund generally
would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If a Fund invests in certain high yield original issue
discount obligations issued by corporations, a portion of the
original issue discount accruing on the obligation may be
eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company
taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated
by the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by a Fund
may be treated as having acquisition discount, or OID in the case
of certain types of debt securities. Generally, a Fund will be
required to include the acquisition discount, or OID, in income
over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections
applicable to debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition
of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by a Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Fund to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the
revised alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by a Fund as capital gain dividends, are taxable to
individual shareholders at a maximum 20% or 28% capital gains
rate (depending on the Fund's holding period for the assets
giving rise to the gain), whether paid in cash or in shares, and
regardless of how long the shareholder has held the Fund's
shares; such distributions are not eligible for the dividends
received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share
received equal to the net asset value of a share of a Fund on the
distribution date. A distribution of an amount in excess of a
Fund's current and accumulated earnings and profits will be
treated by a shareholder as a return of capital which is applied
against and reduces the shareholder's basis in his or her shares.
To the extent that the amount of any such distribution exceeds
the shareholder's basis in his or her shares, the excess will be
treated by the shareholder as gain from a sale or exchange of the
shares. Shareholders will be notified annually as to the U.S.
Federal tax status of distributions and shareholders receiving
distributions in the form of newly issued shares will receive a
report as to the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by a Fund, such
distribution generally will be taxable even though it represents
a return of invested capital. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption
sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder
on the sale of Fund shares held by the shareholder for six-months
or less will be treated for tax purposes as a long-term capital
loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
In some cases, shareholders will not be permitted to take
all or portion of their sales loads into account for purposes of
determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st
day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in a Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by
that country.
If more than 50% of the value of a Fund's total assets at
the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and may elect to "pass-
through" to that Fund's shareholders the amount of foreign income
and similar taxes paid by that Fund. Pursuant to this election,
a shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her pro
rata share of the foreign income and similar taxes paid by a
Fund, and will be entitled either to deduct his or her pro rata
share of foreign income and similar taxes in computing his or her
taxable income or to use it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be notified
within 60 days after the close of a Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that
year and, if so, such notification will designate (1) the
shareholder's portion of the foreign taxes paid to each such
country and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if a
Fund makes the election described in the preceding paragraph, the
source of that Fund's income flows through to its shareholders.
With respect to a Fund, gains from the sale of securities
generally will be treated as derived from U.S. sources and
section 988 gains will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, including
foreign source passive income received from a Fund. In addition,
the foreign tax credit may offset only 90% of the revised
alternative minimum tax imposed on corporations and individuals.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
or the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross
proceeds from the redemption of the particular Fund's shares,
except in the case of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the
case of non-exempt shareholders if (1) the shareholder fails to
furnish a Fund with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the
IRS notifies the shareholder or the particular Fund that the
shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to
certify that he or she is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions
or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to a Fund or shareholders. Shareholders
are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.
PERFORMANCE INFORMATION
Comparisons of a Fund's performance may be made with respect
to various unmanaged indices (including the TSE 300, S&P 100, S&P
500, Dow Jones Industrial Average and Major Market Index) which
assume reinvestment of dividends, but do not reflect deductions
for administrative and management costs. A Fund also may be
compared to Lipper's Analytical Reports, reports produced by a
widely used independent research firm that ranks mutual funds by
overall performance, investment objectives and assets, or to
Wiesenberger Reports. Lipper Analytical Services does not
include sales charges in computing performance. Further
information on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time, include the
average annual total return and the cumulative total return of
shares of a Fund in advertisements, promotional literature or
reports to shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized
average annual total return ("Standardized Return") for a
specific class of shares of a Fund will be expressed in terms of
the average annual compounded rate of return that would cause a
hypothetical investment in that class of a Fund made on the first
day of a designated period to equal the ending redeemable value
("ERV") of such hypothetical investment on the last day of the
designated period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to
purchase shares of a specific class
T = the average annual total return of shares of
that class
n = the number of years
ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period.
For purposes of the above computation for a Fund, it is
assumed that all dividends and capital gains distributions made
by a Fund are reinvested at net asset value in additional shares
of the same class during the designated period. In calculating
the ending redeemable value for Class A shares and assuming
complete redemption at the end of the applicable period, the
maximum 5.75% sales charge is deducted from the initial $1,000
payment and, for Class B shares and Class C shares, the
applicable CDSC imposed upon redemption of Class B shares or
Class C shares held for the period is deducted. Standardized
Return quotations for the Funds do not take into account any
required payments for federal or state income taxes.
Standardized Return quotations for Class B shares for periods of
over eight years will reflect conversion of the Class B shares to
Class A shares at the end of the eighth year. Standardized
Return quotations are determined to the nearest 1/100 of 1%.
A Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective
investors total return data that are not calculated according to
the formula set forth above ("Non-Standardized Return"). Neither
initial nor CDSCs are taken into account in calculating Non-
Standardized Return; a sales charge, if deducted, would reduce
the return.
The following tables summarize the calculation of
Standardized and Non-Standardized Return for the Class A, Class
B, Class C and Class I (for , Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Fund II and Ivy
International Small Companies Fund) shares of the Funds for the
periods indicated. In determining the average annual total
return for a specific class of shares of a Fund, recurring fees,
if any, that are charged to all shareholder accounts are taken
into consideration. For any account fees that vary with the size
of the account of a Fund, the account fee used for purposes of
the following computations is assumed to be the fee that would be
charged to the mean account size of the particular Fund. Shares
of each of Ivy Canada Fund and Ivy Global Fund outstanding as of
March 31, 1994 were designated Class A shares of each respective
Fund. Shares of Ivy International Fund outstanding as of
October 22, 1993 have been redesignated as "Class A" shares of
the Fund.
IVY ASIA PACIFIC FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Inception[#] to/
One year ended
December 31,
1997: (43.06)% (42.96)% (40.94)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Inception[#] to/
One year ended
December 31,
1997: (39.58)% (39.96)% (39.94)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Asia Pacific Fund (and Class A,
Class B and Class C shares of the Fund) was January 1, 1997.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the period from
inception through and the one year ended December 31, 1997
would have been (44.61)%.
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the period from
inception through and the one year ended December 31, 1997
would have been (44.36)%.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the period from
inception through and the one year ended December 31, 1997
would have been (42.46)%.
[4] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the period from inception through and the one
year ended December 31, 1997 would have been (41.23)%.
[5] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the period from inception through and the one
year ended December 31, 1997 would have been (41.43)%.
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the period from inception through and the one
year ended December 31, 1997 would have been (41.46)%.
IVY CANADA FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: (28.14)% (27.83)% (24.95)%
Five years ended
December 31,
1997: 5.48% N/A N/A
Inception[#] to
December 31,
1997:[7] 0.38% (4.47)%
(11.84)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: (23.75)% (24.03)% (23.95)%
Five years ended
December 31,
1997: 6.74% N/A N/A
Inception[#] to
December 31,
1997:[7] 0.96% (3.72)% (11.84)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Canada Fund (and the Class A
shares of the Fund) was November 17, 1987; the inception
date for Class B shares of the Fund was April 1, 1994. The
inception date for Class C shares of the Fund is April 30,
1996. Until December 31, 1994, Mackenzie Investment
Management, Inc. served as investment adviser to the Fund,
which until that date was a series of the Company.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997, the
five years ended December 31, 1997 and the period from
inception through December 31, 1997 would have been
(28.14)%, 5.41% and 0.00%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (27.83)% and
(4.59)%, respectively. (Since the inception date for Class
B shares of the Fund was April 1, 1994, there were no Class
B shares outstanding for the duration of the five year
period ending December 31, 1997.)
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
period ended December 31, 1997 and for the period from
inception through December 31, 1997 would have been (24.95)%
and (11.84)%, respectively. (Since the inception date for
Class C shares of the Fund was April 30, 1996, there were no
Class C shares outstanding for the duration of the five year
period ending December 31, 1997.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (23.75)%, 6.67%
and 0.59%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (24.03)% and (3.81)%, respectively. (Since the
inception date for Class B shares of the Fund was April 1,
1994, there were no Class B shares outstanding for the
duration of the five year period ending December 31, 1997.)
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year period ended December 31, 1997 and
for the period from inception through December 31, 1997
would have been (23.95)% and (11.84)%, respectively. (Since
the inception date for Class C shares of the Fund was April
30, 1996, there were no Class C shares outstanding for the
duration of the five year period ending December 31,
1997.)
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY CHINA REGION FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: (26.43)% (26.44)% (23.46)%
Inception[#] to
December 31,
1997:[7] (5.69)% (5.52)% (9.38)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: (21.94)% (22.57)% (22.46)%
Inception[#] to
December 31,
1997:[7] (4.35)% (5.06)% (9.38)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy China Region Fund (Class A and
Class B shares) was October 23, 1993. The inception date
for Class C shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would
have been (26.56)% and (6.05)%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (26.60)% and
(5.86)%, respectively.
[3] The Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended and the period from inception through December 31,
1997 would have been (23.63)% and (9.51)%, respectively.
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (22.08)% and (4.71)%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (22.73)% and (5.40)%, respectively.
[6] The Non-Standardized Return figures for Class C shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended and the period from inception
through December 31, 1997 would have been (22.63)% and
(9.51)%, respectively.
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY GLOBAL FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: (13.96)% (13.86)% (10.72)%
Five years ended
December 31,
1997: 6.74% N/A N/A
Inception[#] to
December 31,
1997:[7] 6.52% 2.89% (4.21)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: (8.72)% (9.33)% (9.72)%
Five years ended
December 31,
1997: 8.01% N/A N/A
Inception[#] to
December 31,
1997:[7] 7.46% 3.62% (4.21)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Global Fund (and Class A shares
of the Fund) was April 18, 1991; the inception date for
Class B shares of the Fund was April 1, 1994; and the
inception date for the Class C shares of the Fund is April
30, 1996. Until December 31, 1994, Mackenzie Investment
Management Inc. served as investment adviser to the Fund,
which until that date was a series of the Company.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1997, the
five years ended December 31, 1997 and the period from
inception through December 31, 1997 would have been
(13.96)%, 6.56% and 5.80%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (13.86)% and
2.81%, respectively. (Since the inception date for Class B
shares of the Fund was April 1, 1994, there were no Class B
shares outstanding for the duration of the five year period
ending December 31, 1997.)
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended and the period from inception through December 31,
1997 would have been (10.72)% and (4.21)%. (Since the
inception date for Class C shares of the Fund was April 30,
1996, there were no Class C shares outstanding for the
duration of the five year period ending December 31, 1996.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (8.72)%, 7.84% and
6.75%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (9.33)% and 3.55%, respectively. (Since the inception
date for Class B shares of the Fund was April 1, 1994, there
were no Class B shares outstanding for the duration of the
five year period ending December 31, 1997.)
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended and for the period from
inception through December 31, 1997 would have been (9.72)%
and (4.21)%, respectively. (Since the inception date for
Class C shares of the Fund was April 30, 1996, there were no
Class C shares outstanding for the duration of the five year
period ending December 31, 1997.)
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY GLOBAL NATURAL RESOURCES FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Inception[#] to/
One year ended
December 31,
1997: 0.80% 1.28% 5.08%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Inception[#] to/
One year ended
December 31,
1997: 6.95% 6.28% 6.08%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Global Natural Resources
Fund (and Class A, Class B and Class C shares of the
Fund) was January 1, 1997.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the period from
inception through and the one year ended December 31, 1997
would have been 0.73%.
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the period from
inception through and the one year ended December 31, 1997
would have been 1.23%.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the period from
inception through and the one year ended December 31, 1997
would have been 5.02%.
[4] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the period from inception through and the one
year ended December 31, 1997 would have been 6.87%.
[5] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the period from inception through and the one
year ended December 31, 1997 would have been 6.23%.
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the period from inception through and the one
year ended December 31, 1997 would have been 6.02%.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]CLASS I[4]
One year ended
1997: 0.40% 0.66% 4.71% N/A
Inception[#] to
December 31,
1997:[8] 41.59% 44.50% 46.91% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7]CLASS I[4]
One year ended
1997: 6.53% 5.66% 5.71% N/A
Inception[#] to
December 31,
1997:[8] 47.38% 46.85% 46.91% N/A
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
Class I shares are not subject to an initial or a CDSC;
therefore, the Non-Standardized Return figures would be
identical to the Standardized Return figures.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Global Science & Technology Fund
(and Class A, Class B, Class C and Class I shares of the
Fund) was July 22, 1996.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the one year
period ended and for the period from inception through
December 31, 1997 would have been 0.40% and 41.43%,
respectively.
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
period ended and for the period from inception through
December 31, 1997 would have been 0.66% and 44.42%,
respectively.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
period ended and for the period from inception through
December 31, 1997 would have been 4.71% and 46.83%,
respectively.
[4] Class I shares are not subject to an initial sales charge or
a CDSC, therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year period ended and for the period from
inception through December 31, 1997 would have been 6.53%
and 47.37%, respectively.
[6] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year period ended and for the period from
inception through December 31, 1997 would have been 5.66%
and 46.77%, respectively.
[7] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year period ended and for the period from
inception through December 31, 1997 would have been 5.71%
and 46.83%, respectively.
[8] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY INTERNATIONAL FUND II:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]CLASS I[4]
Inception[#] to
December 31,
1997:[8] (15.45)% (15.25)% (11.79)% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7]CLASS I[4]
Inception[#] to
December 31,
1997:[8] (10.29)% (10.79)% (10.79)% N/A
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
Class I shares are not subject to an initial or a CDSC;
therefore, the Non-Standardized Return figures would be
identical to the Standardized Return figures.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy International Fund II (and Class
A, Class B, Class C and Class I shares of the Fund) was May
13, 1997.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the period from
inception through December 31, 1997 would have been
(15.46)%.
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the period from
inception through December 31, 1997 would have been
(15.26)%.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the period from
inception through December 31, 1997 would have been
(11.80)%.
[4] Class I shares are not subject to an initial sales charge or
a CDSC, therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the period from inception through December 31,
1997 would have been (10.30)%.
[6] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the period from inception through December 31,
1997 would have been (10.80)%.
[7] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the period from inception through December 31,
1997 would have been (10.80)%.
[8] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY INTERNATIONAL FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
One year ended
December 31,
1997: 4.03% 4.49% 8.50% 10.87%
Five years ended
December 31,
1997: 16.69% N/A N/A N/A
Ten years ended
December 31,
1997: 13.87% N/A N/A N/A
Inception[#] to
December 31,
1997:[8] N/A 11.68% 12.66% 12.74%
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
One year ended
December 31,
1997: 10.38% 9.49% 9.50% 10.87%
Five years ended
December 31,
1997: 18.08% N/A N/A N/A
Ten years ended
December 31,
1997: 14.55% N/A N/A N/A
Inception[#] to
December 31,
1997:[8] N/A 12.00% 12.66% 12.74%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
Class I shares are not subject to an initial or a CDSC;
therefore, the Non-Standardized Return figures would be
identical to the Standardized Return figures.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy International Fund (and the Class
A shares of the Fund) was April 21, 1986; the inception date
for the Class B and Class I shares of the Fund was
October 23, 1993; and the inception date for the Class C
shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1996, the
five years ended December 31 and the ten years ended
December 31, 1997 would have been 4.03%, 16.69% and
13.86%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 4.49% and 11.68%,
respectively. (Since the inception date for Class B shares
of the Fund was October 23, 1993, there were no Class B
shares outstanding for the duration of the five year or ten
year periods ending December 31, 1997.)
[3] The Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended and the period from inception through December 31,
1997 would have been 8.50% and 12.66%, respectively. (Since
the inception date for Class C shares of the Fund was April
30, 1996, there were no Class C shares outstanding for the
duration of the five year or ten year periods ending
December 31, 1997.)
[4] Class I shares are not subject to an initial sales charge or
a CDSC, therefore the Non-Standardized and Standardized
Return figures are identical. (Since the inception date for
Class I shares of the Fund was October 23, 1993, there were
no Class I shares outstanding for the duration of the five
year or ten year periods ending December 31, 1997.)
[5] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997, the five
years ended December 31 and the ten years ended December 31,
1997 would have been 10.38%, 18.08% and 14.54%,
respectively.
[6] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 9.49% and 12.00%, respectively. (Since the inception
date for Class B shares of the Fund was October 23, 1993,
there were no Class B shares outstanding for the duration of
the five year or ten year periods ending December 31, 1997.)
[7] The Non-Standardized Return figures for Class C shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended and the period from inception
through December 31, 1997 would have been 9.50% and 12.66%,
respectively. (Since the inception date for Class C shares
of the Fund was April 30, 1996, there were no Class C shares
outstanding for the duration of the five year or ten year
periods ending December 31, 1997.)
[8] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY INTERNATIONAL SMALL COMPANIES FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Inception[#] to/
One year ended
December 31,
1997: (17.55)% (17.53)% (14.14)% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Inception[#] to/
One year ended
December 31,
1997: (12.52)% (13.19)% (13.14)%
N/A
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy International Small
Companies Fund (and Class A, Class B, Class C and Class
I shares of the Fund) was January 1, 1997.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the period from
inception through and the one year ended December 31, 1997
would have been (19.05)%
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the period from
inception through and the one year ended December 31, 1997
would have been (18.69)%
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the period from
inception through and the one year ended December 31, 1997
would have been (15.66)%
[4] Class I shares are not subject to an initial sales charge or
a CDSC, therefore the Non-Standardized and Standardized
Return figures are identical.
[5] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the period from inception through and the one
year ended December 31, 1997 would have been (14.10)%
[6] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the period from inception through and the one
year ended December 31, 1997 would have been (14.41)%
[7] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the period from inception through and the one
year ended December 31, 1997 would have been (14.66)%
IVY SOUTH AMERICA FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: 0.88% 1.18% 5.06%
Inception[#] to
December 31,
1997:[7] (4.31)% (4.18)% 7.66%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: 7.03% 6.18% 6.06%
Inception[#] to
December 31,
1997:[7] (2.51)% (3.26)% 7.66%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy South America Fund (Class A
and Class B shares) was November 1, 1994. The
inception date for Class C shares of the Fund is April
30, 1996.
[1] The Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 0.20% and (8.33)%,
respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been 0.36% and (8.04)%,
respectively.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for one year ended
and the period from inception through December 31, 1997
would have been 4.42% and 6.66%. (Since the inception date
for Class C shares of the Fund was April 30, 1996, there
were no Class C shares outstanding for the duration of the
five year or ten year periods ending December 31, 1997.)
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 6.32% and (6.58)%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been 5.36% and (7.15)%, respectively.
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended and the period from inception
through December 31, 1997 would have been 5.42% and 6.66%,
respectively. (Since the inception date for Class C shares
of the Fund was April 30, 1996, there were no Class C shares
outstanding for the duration of the five year or ten year
periods ending December 31, 1997.)
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY DEVELOPING NATIONS FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
One year ended
December 31,
1997: (31.60)% (31.54)% (29.01)%
Inception[#] to
December 31,
1997:[7] (10.48)% (10.33)% (17.00)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
One year ended
December 31,
1997: (27.42)% (27.93)% (28.01)%
Inception[#] to
December 31,
1997:[7] (8.80)% (9.47)% (17.00)%
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Developing Nations Fund (Class A
and Class B shares) was November 1, 1994. The inception
date for Class C shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (31.66)% and
(12.19)%, respectively.
[2] The Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the one year
ended December 31, 1997 and the period from inception
through December 31, 1997 would have been (31.60)% and
(12.01)%, respectively.
[3] The Standardized Return figure for Class C shares reflects
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class C shares for the one year
ended and the period from inception through December 31,
1997 would have been (29.07)% and (17.11)%, respectively.
[4] The Non-Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (27.49)% and (10.52)%, respectively.
[5] The Non-Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the one year ended December 31, 1997 and the
period from inception through December 31, 1997 would have
been (27.99)% and (11.15)%, respectively.
[6] The Non-Standardized Return figure for Class C shares
reflects expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class C
shares for the one year ended and the period from inception
through December 31, 1997 would have been (28.07)% and
(17.11)%, respectively.
[7] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
IVY PAN-EUROPE FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C
Inception[#] to
December 31,
1997:[7] (0.53)% 0.26% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4] CLASS C
Inception[#] to
December 31,
1997:[5] 5.54% 5.26% N/A
_________________________
[*] The Standardized Return figures for Class A shares reflect
the deduction of the maximum initial sales charge of 5.75%.
The Standardized Return figures for Class B and C shares
reflect the deduction of the applicable CDSC imposed on a
redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the
deduction of any initial sales charge or CDSC.
[#] The inception date for Ivy Pan-Europe Fund (and Class A,
Class B and Class C shares of the Fund) was May 13, 1997.
[1] The Standardized Return figure for Class A shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class A shares for the period from
inception through December 31, 1997 would have been (9.50)%.
[2] The Standardized Return figure for Class B shares reflect
expense reimbursement. Without expense reimbursement, the
Standardized Return for Class B shares for the period from
inception through December 31, 1997 would have been (3.56)%.
[3] The Non-Standardized Return figure for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class A
shares for the period from inception through December 31,
1997 would have been (3.90)%.
[4] The Non-Standardized Return figure for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Non-Standardized Return for Class B
shares for the period from inception through December 31,
1997 would have been 1.27%.
[5] The total return for a period less than a full year is
calculated on an aggregate basis and is not annualized.
CUMULATIVE TOTAL RETURN. Cumulative total return is the
cumulative rate of return on a hypothetical initial investment of
$1,000 in a specific Class of shares of a Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of a Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
the Fund shares. Cumulative total return is calculated by
computing the cumulative rates of return of a hypothetical
investment in a specific Class of shares of a Fund over such
periods, according to the following formula (cumulative total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000
to purchase shares of a specific Class
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
IVY ASIA PACIFIC FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A (43.06)%
Class B (42.96)%
Class C (40.94)%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A (39.58)%
Class B (39.96)%
Class C (39.94)%
___________________________
[*] The inception date for Ivy Asia Pacific Fund (Class A, Class
B and Class C shares) was January 1, 1997.
IVY CANADA FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A (28.14)% 30.59% 3.90%
Class B (27.83)% N/A[**] (15.87)%
Class C (24.95)% N/A[**] (19.00)%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A (23.75)% 38.55% 10.24%
Class B (24.03)% N/A[**] (13.26)%
Class C (23.95)% N/A[**] (19.00)%
___________________________
[*] The inception date for Ivy Canada Fund (and the Class A
shares of the Fund) was November 17, 1987; the inception
date for the Class B shares of Ivy Canada Fund was April 1,
1994; and the inception date for Class C shares of Ivy
Canada Fund was April 30, 1996. Until December 31, 1994,
Mackenzie Investment Management, Inc. served as investment
adviser to Ivy Canada Fund, which until that date was a
series of the Company.
[**] No such shares were outstanding for the duration of the time
period indicated.
IVY CHINA REGION FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (26.43)% (21.76)%
Class B (26.44)% (21.16)%
Class C (23.46)% (15.18)%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (21.94)% (16.99)%
Class B (22.57)% (19.55)%
Class C (22.46)% (15.18)%
___________________________
[*] The inception date for Ivy China Region Fund (Class A and
Class B shares) was October 23, 1993. The inception date
for Class C shares of the Fund is April 30, 1996.
IVY GLOBAL FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A (13.96)% 38.58% 52.76%
Class B (13.86)% N/A[**] 11.28%
Class C (10.72)% N/A[**] (6.94)%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A (8.72)% 47.03% 62.08%
Class B 9.33% N/A[**] 14.28%
Class C (9.72)% N/A[**] (6.94)%
___________________________
[*] The inception date for the Fund (and Class A shares of the
Fund) was April 18, 1991; the inception date for Class B
shares of the Fund was April 1, 1994; and the inception date
for Class C shares of the Fund was April 30, 1996. Until
December 31, 1994, Mackenzie Investment Management Inc.
served as investment adviser to the Fund, which until that
date was a series of the Company.
[**] No such shares were outstanding for the duration of the time
period indicated.
IVY GLOBAL NATURAL RESOURCES FUND. The following table
summarizes the calculation of Cumulative Total Return for the
periods indicated through December 31, 1997, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A 0.80%
Class B 1.28%
Class C 5.08%
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A 6.95%
Class B 6.28%
Class C 6.08%
___________________________
[*] The inception date for Ivy Global Natural Resources Fund
(Class A, Class B and Class C shares) was January 1, 1997.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND. The following table
summarizes the calculation of Cumulative Total Return for the
periods indicated through December 31, 1997, assuming the maximum
5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 0.40% 65.00%
Class B 0.66% 69.90%
Class C 4.71% 74.26%
Class I N/A N/A
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 6.53% 75.07%
Class B 5.66% 73.90%
Class C 5.71% 74.26%
Class I N/A N/A
___________________________
[*] The inception date for Ivy Global Science & Technology Fund
(Class A, Class B, Class C and Class I shares) was July 22,
1996.
IVY INTERNATIONAL FUND II. The following table summarizes
the calculation of Cumulative Total Return for the periods
indicated through December 31, 1997, assuming the maximum 5.75%
sales charge has been assessed.
SINCE
INCEPTION[*]
Class A (15.45)%
Class B (15.25)%
Class C (11.79)%
Class I N/A
The following table summarizes the calculation of Cumulative
Total Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
INCEPTION[*]
Class A (10.29)%
Class B (10.79)%
Class C (10.79)%
Class I N/A
___________________________
[*] The inception date for Ivy International Fund II (Class A,
Class B, Class C and Class I shares) was May 13, 1997.
IVY INTERNATIONAL FUND. The following table summarizes the
calculation of Cumulative Total Return for the periods indicated
through December 31, 1997, assuming the maximum 5.75% sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 4.03% 116.32% 266.48% N/A
Class B 4.49% N/A[**] N/A[**] 58.87%
Class C 8.50% N/A[**] N/A[**] 21.04%
Class I 10.87% N/A[**] N/A[**] 65.39%
The following table summarizes the calculation of
Cumulative Total Return for the periods indicated through
December 31, 1997, assuming the maximum 5.75% sales charge has
not been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 10.38% 129.51% 288.84% N/A
Class B 9.49% N/A[**] N/A[**] 60.87%
Class C 9.50% N/A[**] N/A[**] 22.04%
Class I 10.87% N/A[**] N/A[**] 65.39%
___________________________
[*] The inception date for Ivy International Fund (and
the Class A shares of the Fund) was April 21, 1986;
the inception date for the Class B and Class I
shares of Ivy International Fund was October 23,
1993. The inception date for Class C shares of the
Fund was April 30, 1996.
[**] No such shares were outstanding for the duration of
the time period indicated.
IVY INTERNATIONAL SMALL COMPANIES FUND. The
following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1997,
assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A (17.55)%
Class B (17.53)%
Class C (14.14)%
Class I N/A
The following table summarizes the calculation of
Cumulative Total Return for the periods indicated through
December 31, 1997, assuming the maximum 5.75% sales charge has
not been assessed.
ONE YEAR/SINCE
INCEPTION[*]
Class A (12.52)%
Class B (13.19)%
Class C (13.14)%
Class I N/A
___________________________
[*] The inception date for Ivy International Small
Companies Fund (Class A, Class B, Class C and Class
I shares) was January 1, 1997.
IVY SOUTH AMERICA FUND. The following table
summarizes the calculation of Cumulative Total Return for the
periods indicated through December 31, 1997, assuming the maximum
5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 0.88% (13.04)%
Class B 1.18% (12.66)%
Class C 5.06% 13.12%
The following table summarizes the calculation of
Cumulative Total Return for the periods indicated through
December 31, 1997, assuming the maximum 5.75% sales charge has
not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 7.03% (7.73)%
Class B 6.18% (9.96)%
Class C 6.06% 13.12%
___________________________
[*] The inception date for Ivy South America Fund (Class
A and Class B shares) was November 1, 1994. The
inception date for Class C shares of the Fund was
April 30, 1996.
IVY DEVELOPING NATIONS FUND. The following table
summarizes the calculation of Cumulative Total Return for the
periods indicated through December 31, 1997, assuming the maximum
5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (31.60)% (29.59)%
Class B (31.54)% (29.22)%
Class C (29.01)% (26.76)%
The following table summarizes the calculation of
Cumulative Total Return for the periods indicated through
December 31, 1997, assuming the maximum 5.75% sales charge has
not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (27.42)% (25.30)%
Class B (27.93)% (27.04)%
Class C (28.01)% (26.76)%
___________________________
[*] The inception date for Ivy Developing Nations Fund
(Class A and B shares) was November 1, 1994. The
inception date for Class C shares of the Fund was
April 30, 1996.
IVY PAN-EUROPE FUND. The following table summarizes
the calculation of Cumulative Total Return for the periods
indicated through December 31, 1997, assuming the maximum 5.75%
sales charge has been assessed.
SINCE
INCEPTION[*]
Class A (0.53)%
Class B 0.26%
Class C N/A
The following table summarizes the calculation of
Cumulative Total Return for the periods indicated through
December 31, 1997, assuming the maximum 5.75% sales charge has
not been assessed.
SINCE
INCEPTION[*]
Class A 5.54%
Class B 5.26%
Class C N/A
___________________________
[*] The inception date for Ivy Pan-Europe Fund (Class A,
Class B and Class C shares) was May 13, 1997.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for a Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of that Fund. These
factors and possible differences in the methods used in
calculating performance quotations should be considered when
comparing performance information regarding a Fund's shares with
information published for other investment companies and other
investment vehicles. Performance quotations should also be
considered relative to changes in the value of a Fund's shares
and the risks associated with a Fund's investment objectives and
policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can
be no assurance that any historical performance quotation will
continue in the future.
The Funds may also cite endorsements or use for comparison
their performance rankings and listings reported in such
newspapers or business or consumer publications as, among others:
AAII Journal, Barron's, Boston Business Journal, Boston Globe,
Boston Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31,
1997, Statement of Assets and Liabilities as of December 31,
1997, Statement of Operations for the fiscal year ended December
31, 1997 (for the period from May 13, 1997 (commencement of
operations) to December 31, 1997 for Ivy International Fund II
and Ivy Pan-Europe Fund), Statement of Changes in Net Assets for
the fiscal years ended December 31, 1997 and December 31, 1996
(for the period from May 13, 1997 (commencement of operations) to
December 31, 1997 for Ivy International Fund II and Ivy Pan-
Europe Fund), Financial Highlights, Notes to Financial
Statements, and Report of Independent Accountants, which are
included in each Fund's December 31, 1997 Annual Report to
shareholders, are incorporated by reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue. Issuers rated Prime-2 are deemed to have a strong ability
for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND CHINA REGION COUNTRIES
The information set forth in this Appendix has been
extracted from various government and private publications.
Neither Ivy China Region Fund, Ivy Asia Pacific Fund nor the
Trust's Board of Trustees make any representation as to the
accuracy of such information, nor have the Funds or the Trust's
Board of Trustees attempted to verify it.
The China Region, one of the fastest growing areas of the
world, is diverse, dynamic and evolving. In terms of population,
this region is almost seven times the size of the United
States.
Countries in this region are at various stages of economic
development. Hong Kong and Singapore are at a more advanced stage
of economic growth while countries such as Indonesia and China
are at the early stages of economic development. GDP per capita
data presented below illustrates this point. The following table
shows the GDP, population and per capita GDP of the China Region
countries and, for comparison purposes, the United States.
1996
GDP ($US POPULATION PER CAPITA
BILLIONS) (MILLIONS) GDP ($US)
--------- --------- ---------
Hong Kong 161.1 6.2 25,984
Korea 512.3 44.9 11,410
Singapore 91.2 3.0 30,400
Taiwan 259.2 21.2 12,226
Thailand 161.7 60.2 2,686
Malaysia 94.8 19.7 4,812
Indonesia 230.4 193.8 1,189
Philippines 83.5 68.4 1,221
China 700.7 1,294.4 541
China Region 2,294.9 1,711.8 1,341
USA 7,576.1 263.0 28,806
Source: International Marketing Data and Statistics, 22nd Ed.
(Euromonitor 1998); World Economic Factbook, 1997-98.
Total GDP for the China Region was about $2.3 billion in
1996, approximately one third of the GDP of the United States.
Year over year growth in GDP for the China Region is significant,
averaging 13.82% for the five-year period 1992-1996 compared with
only 5.77% for the United States for the same period. The
following tables show the annual change in GDP and inflation, as
measured by the Consumer Price Indexes (CPI), in 1992-1996 and
the average for the five-year period 1992-1996.
CHANGE IN GROSS DOMESTIC PRODUCT
AVERAGE
1992 1993 1994 1995 1996 1992-96
----- ----- ----- ----- ------ -------
Hong Kong 16.58% 15.17% 13.55% 9.33% 11.85% 13.30%
Korea 11.43% 11.13% 14.17% 15.18% 17.31% 13.84%
Singapore 7.12% 14.52% 14.04% 9.63% 6.63% 10.39%
Taiwan 10.95% 10.06% 3.14% 3.91% 13.03% 8.22%
Thailand 12.47% 11.89% 13.60% 15.21% -1.20% 10.39%
Malaysia 14.07% 10.32% 13.68% 13.83% 13.09% 13.00%
Indonesia 14.26% 26.89% 14.99% 1.01% 38.08% 19.05%
Philippines 8.30% 9.13% 14.84% 12.48% 14.94% 11.94%
China 18.97% 30.64% 39.58% 28.29% 3.68% 24.23%
United States 5.19% 5.37% 6.23% 5.07% 7.01% 5.77%
Source: International Marketing Data and Statistics, 22nd Ed.
(Euromonitor 1998).
CHANGE IN CONSUMER PRICE INDEXES
AVERAGE
1992 1993 1994 1995 1996
1992-96 ---- ---- ---- ---- ---- -------
Hong Kong 9.3% 8.6% 8.1% 8.7% 6.0% 8.1%
Korea 6.4% 5.2% 5.7% 4.7% 4.8% 5.4%
Singapore 2.3% 2.4% 3.0% 1.7% 1.6% 2.2%
Taiwan 4.5% 2.9% 4.5% 3.7% 3.1% 3.7%
Thailand 3.8% 3.6% 5.3% 5.0% 5.4% 4.6%
Malaysia 4.8% 3.7% 3.5% 6.0% 3.0% 4.2%
Indonesia 8.3% 9.3% 8.5% 9.3% 6.6% 8.4%
Philippines 8.4% 7.8% 9.4% 7.9% 8.8% 8.5%
China 5.8% 14.5% 24.6% 16.6% 8.3% 14.0%
United States 3.0% 3.0% 2.6% 2.8% 2.9% 2.86%
Sources: Emerging Stock Markets Factbook, 1997; OECD Economic
Outlook, December 1997, Vol. 62.; World Bank (David Cislikowski
and John Kim).
As the economics of the countries that comprise the China
Region have experienced different levels of growth, so too have
their stock markets. The following tables show the
capitalization of the stock markets and the changes in stock
prices as measured by local stock indexes.
STOCK MARKET CAPITALIZATION ($US MILLIONS)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
China 18,255 40,567 43,521 42,055 113,755
Hong Kong 170,793 381,459 267,331 301,065 449,381
Korea 107,448 139,420 191,778 181,955 138,817
Singapore 61,180 147,810 177,670 203,230 150,215
Taiwan 101,124 195,198 247,325 187,206 273,608
Thailand 58,259 130,510 131,479 141,507 99,828
Malaysia 94,004 220,328 199,276 222,729 307,179
Indonesia 12,038 32,953 47,241 66,585 91,016
Philippines 13,794 40,327 55,519 58,859 80,649
Sources: Emerging Stock Markets Factbook, 1997; World Bank (Kyuee
Pahk).
ANNUAL PERCENTAGE CHANGES IN LOCAL
STOCK MARKET INDEXES
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
China -12.87% 6.84% -22.30% -14.30% 65.17%
Hong Kong -28.3% -115.7% 31.1% -23.0% *
Korea 11.05% 27.67% 18.61% -14.06% -26.24%
Singapore -2.4% 59.2% -15.1% 4.09% *
Taiwan -26.60% 79.76% 17.36% -27.38% 34.02%
Thailand 25.59% 88.36% -19.18% - 5.83% -35.07%
Malaysia 15.77% 98.04% -23.85% 2.47% 24.40%
Indonesia 10.89% 114.61% -20.23% 9.41% 24.05%
Philippines 9.06% 154.42% -12.84% -6.88% 22.22%
* Not available.
Source: Emerging Stock Markets Factbook, 1997.
Equity valuations in the China Region, as measured by
price/earnings ratios, also vary from country to country
according to economic growth forecasts, corporate earnings growth
forecasts, the outlook for inflation, exchange rates and overall
investor sentiment.
PRICE/EARNINGS RATIOS
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Hong Kong 13.1 21.6 10.7 11.4 16.7
Korea 21.4 25.1 34.5 19.8 11.7
Singapore 19.15 24.7 30.4 23.3 23.1
Taiwan 16.6 34.7 36.8 21.4 28.2
Thailand 13.9 27.5 21.2 21.7 13.1
Malaysia 21.8 43.5 29.0 25.1 27.1
Indonesia 12.2 28.9 20.2 19.8 21.6
Philippines 14.1 38.8 30.8 19.0 20.0
Sources: Emerging Stock Markets Factbook, 1997; World Stock
Exchange Factbook, 1997.
The following table shows changes in the currency exchange
rates of each China Region country relative to the U.S. dollar
for the years ended December 31, 1992-1996.
CURRENCY MOVEMENTS VERSUS US DOLLAR (% CHANGE)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Hong Kong 0.39% 0.06% 0.13% 0.13% -0.1%
Korea -3.77% -2.44% 2.49% 1.64% -8.25%
Singapore -0.88% 2.24% 9.16% 3.18% -0.7%
Taiwan 1.31% -4.51% 0.27% -3.66% -0.77%
Thailand -1.73% 0.04% 1.47% -0.34% -1.76%
Malaysia 4.03% -2.90% 5.46% 0.57% 0.53%
Indonesia -3.85% -1.88% -4.32% -3.87% -3.22%
Philippines 2.15% -5.19% 10.66% -6.98% -0.27%
China (Official)-5.84% -0.84% -45.6% 1.53% -0.5%
Sources: Emerging Stock Markets Factbook, 1997; World Bank (David
Cislikowski).
IVY ASIA PACIFIC FUND
IVY CANADA FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS FUND
IVY GLOBAL FUND
IVY GLOBAL NATURAL RESOURCES FUND
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY INTERNATIONAL FUND II
IVY INTERNATIONAL SMALL COMPANIES FUND
IVY PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
April 30, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy South America Fund) is
diversified. This Statement of Additional Information ("SAI")
relates to the Advisor Class shares of the eleven portfolios
listed above (collectively, the "Funds," and each, a "Fund").
The other seven portfolios of the Trust are described in separate
SAIs.
This SAI is not a prospectus and should be read in
conjunction with the Prospectus for the Funds' Advisor Class
shares dated April 30, 1998 (the "Prospectus"), which may be
obtained upon request and without charge from the Distributor at
the address and telephone number printed below. Advisor Class
shares are only offered to certain investors (see the
Prospectus). The Funds also offer Class A, Class B and Class C
shares (and Class I shares, in the case of Ivy Global Science &
Technology Fund, Ivy International Fund II and Ivy International
Small Companies Fund), which are described in a separate
prospectus and SAI that may also be obtained without charge from
the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(Ivy Canada Fund and Ivy Global Natural Resources Fund only)
Mackenzie Financial Corporation
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone (416) 922-5322
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 10
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 10
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 11
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 11
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 11
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . . . 12
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 12
U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . 12
INVESTMENT-GRADE DEBT SECURITIES . . . . . . . . . . 12
LOW-RATED DEBT SECURITIES. . . . . . . . . . . . . . 13
ZERO COUPON BONDS. . . . . . . . . . . . . . . . . . 14
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED"
SECURITIES . . . . . . . . . . . . . . . . . . . . . 14
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 14
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 15
DEPOSITORY RECEIPTS. . . . . . . . . . . . . . . . . 16
EMERGING MARKETS . . . . . . . . . . . . . . . . . . 16
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . 17
CONCENTRATION RISKS . . . . . . . . . . . . . . . . . . . 17
THE ASIA-PACIFIC REGION. . . . . . . . . . . . . . . 18
THE CHINA REGION . . . . . . . . . . . . . . . . . . 18
CANADIAN SECURITIES. . . . . . . . . . . . . . . . . 19
NATURAL RESOURCES AND PHYSICAL COMMODITIES . . . . . 20
SOUTH AMERICAN SECURITIES. . . . . . . . . . . . . . 20
ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . 22
REAL ESTATE INVESTMENT TRUSTS (REITS) . . . . . . . . . . 23
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 23
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . 23
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 23
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 23
IN GENERAL . . . . . . . . . . . . . . . . . . . . . 23
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 24
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 25
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 25
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 26
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . 27
IN GENERAL.. . . . . . . . . . . . . . . . . . . . . 27
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS.. . . . . . . . . . . . . . . . . . . . 27
RISKS ASSOCIATED WITH FUTURES AND RELATED
OPTIONS.. . . . . . . . . . . . . . . . . . . . 28
STOCK INDEX FUTURES CONTRACTS . . . . . . . . . . . . . . 29
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 29
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . . 30
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 30
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 35
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 36
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 36
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 37
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 37
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 38
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 39
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 40
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 40
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 41
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 41
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 41
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 44
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 48
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 49
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 51
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 51
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 54
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 55
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 55
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 55
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 56
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 56
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 56
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 57
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 61
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 62
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 62
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 64
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
. . . . . . . . . . . . . . . . . . . . . . . . . . 65
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 65
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 65
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 66
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 67
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 67
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 68
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 68
AVERAGE ANNUAL TOTAL RETURN . . . . . . . . . . . . . . . 69
CUMULATIVE TOTAL RETURN . . . . . . . . . . . . . . . . . 69
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . . 70
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 70
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . 72
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND CHINA REGION COUNTRIES. . . . . . . . . . . . 75
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objectives and Policies" and "Risk Factors and
Investment Techniques." The different types of securities and
investment techniques used by the Funds involve varying degrees
of risk, and are described more fully under "Risk Factors,"
below.
IVY ASIA PACIFIC FUND: The Fund's principal investment
objective is long-term growth. Consideration of current income is
secondary to this principal objective. Under normal circumstances
the Fund invests at least 65% of its total assets in securities
issued in Asia-Pacific countries, which for purposes of this
Prospectus are defined to include China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri
Lanka, South Korea, Taiwan, Thailand and Vietnam. Securities of
Asia-Pacific issuers include: (a) securities of companies
organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific
region; (b) securities that are issued or guaranteed by the
government of an Asia-Pacific country, its agencies or
instrumentalities, political subdivisions or the country's
central bank; (c) securities of a company, wherever organized,
where at least 50% of the company's non-current assets,
capitalization, gross revenue or profit in any one of the two
most recent fiscal years represents (directly or indirectly
through subsidiaries) assets or activities located in the
Asia-Pacific region; and (d) any of the preceding types of
securities in the form of depository shares.
The Fund may participate in markets throughout the
Asia-Pacific region, and it is expected that the Fund will be
invested at all times in at least three Asia-Pacific countries.
The Fund does not expect to concentrate its investments in any
particular industry. See Appendix C to the SAI for further
information about the economic characteristics of certain
Asia-Pacific countries.
The Fund may invest up to 35% of its assets in
investment-grade debt securities of government or corporate
issuers in emerging market countries, equity securities and
investment grade debt securities of issuers in developed
countries (including the United States), warrants, and cash or
cash equivalents, such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For temporary
defensive purposes, the Fund may invest without limit in such
instruments. The Fund may also invest up to 5% of its net assets
in zero coupon bonds, and in debt securities rated Ba or below by
Moody's Investor Service, Inc. ("Moody's") or BB or below by
Standard and Poor's Corporation ("S&P"), or if unrated, are
considered by IMI to be of comparable quality (commonly referred
to as "high yield" or "junk" bonds). The Fund will not invest in
debt securities rated less than C by either Moody's or S&P. As of
December 31, 1997, the Fund held no low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies that invest in securities issued in
Asia-Pacific countries, and up to 15% of its net assets in
illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets are subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY CANADA FUND: Ivy Canada Fund seeks long-term capital
appreciation by investing primarily in equity securities of
Canadian companies. Canada is one of the world's leading
industrial countries and a major exporter of agricultural
products. The country is rich in natural resources such as zinc,
uranium, nickel, gold, silver, aluminum, iron and copper, and
forest covers over 44% of land areas, making Canada a leading
world producer of newsprint. Canada is also a major producer of
hydroelectricity, oil and gas.
As a fundamental policy, the Fund normally invests at least
65% of its total assets in Canadian equity securities (i.e.,
common and preferred stock, securities convertible into common
stock and common stock purchase warrants) listed on Canadian
stock exchanges or traded over-the-counter in Canada. Canadian
issuers are companies (i) organized under the laws of Canada,
(ii) for which the principal securities trading market is in
Canada, (iii) which derive at least 50% of their revenues or
profits from goods produced or sold, investments made or services
performed in Canada, or (iv) which have at least 50% of their
assets situated in Canada. The balance of the Fund's assets
ordinarily are invested in (i) bills and bonds of the Canadian
Government and the governments of the provinces or municipalities
of Canada, (ii) high quality notes and debentures of Canadian
companies (i.e., those rated Aaa or Aa by Moody's or AAA or AA by
S&P, or if unrated, judged to be of comparable quality by
Mackenzie Financial Corporation ("MFC"), the Fund's Advisor),
(iii) foreign securities (including sponsored or unsponsored
American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs") and Global
Depository Shares ("GDSs")), (iv) U.S. Government securities,
(v) equity securities and investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or
if unrated, are considered by MFC to be of comparable quality) of
U.S. companies, and (vi) zero coupon bonds that meet these credit
quality standards.
The Fund may purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid
securities. The Fund may not, as a matter of fundamental policy,
invest more than 5% of its total assets in restricted securities.
For temporary defensive purposes, the Fund may invest
without limit in U.S. or Canadian dollar-denominated money market
securities issued by entities organized in the U.S. or Canada,
such as (i) obligations issued or guaranteed by the Canadian
Government or the governments of the provinces or municipalities
of Canada (or their agencies or instrumentalities), (ii) finance
company and corporate commercial paper (and other short-term
corporate obligations rated Prime-1 by Moody's or A or better by
S&P, or if unrated, considered by MFC to be of comparable
quality), (iii) obligations of banks (i.e., certificates of
deposit, time deposits and bankers' acceptances) considered
creditworthy by MFC under guidelines approved by the Trustees,
and (iv) repurchase agreements with broker-dealers and banks. For
temporary or emergency purposes, the Fund may also borrow up to
10% of the value of its total assets from banks.
IVY CHINA REGION FUND: Ivy China Region Fund's principal
investment objective is long-term capital growth. Consideration
of current income is secondary to this principal objective. The
Fund seeks to meet its objective primarily by investing in the
equity securities of companies that are expected to benefit from
the economic development and growth of China, Hong Kong and
Taiwan. A significant percentage of the Fund's assets may also be
invested in the securities markets of South Korea, Singapore,
Malaysia, Thailand, Indonesia and the Philippines (collectively,
with China, Hong Kong and Taiwan, the "China Region").
The Fund normally invests at least 65% of its total assets
in "Greater China growth companies," defined as companies
(a) that are organized in or for which the principal securities
trading markets are the China Region; (b) that have at least 50%
of their assets in one or more China Region countries or derive
at least 50% of their gross sales revenues or profits from
providing goods or services to or from within one or more China
Region countries; or (c) that have at least 35% of their assets
in China, Hong Kong or Taiwan, derive at least 35% of their gross
sales revenues or profits from providing goods or services to or
from within these three countries, or have significant
manufacturing or other operations in these countries. IMI's
determination as to whether a company qualifies as a Greater
China growth company is based primarily on information contained
in financial statements, reports, analyses and other pertinent
information (some of which may be obtained directly from the
company). The Fund may invest 25% or more of its total assets in
the securities of issuers located in any one China Region
country, and currently expects to invest more than 50% of its
total assets in Hong Kong. See Appendix B to the SAI for further
information about the economic characteristics of certain China
Region countries.
The balance of the Fund's assets ordinarily are invested in
(i) certain investment-grade debt securities and (ii) the equity
securities of "China Region associated companies," which are
companies that do not meet the definition of a Greater China
growth company, but whose current or expected performance, based
on certain identified factors (such as the growth trends in the
location of a company's assets and the sources of its revenues
and profits), is judged by IMI to be strongly associated with the
China Region. The investment-grade debt securities in which the
Fund may invest include (a) obligations of the U.S. Government or
its agencies or instrumentalities, (b) obligations of U.S. banks
and other banks organized and existing under the laws of Hong
Kong, Taiwan or countries that are members of the Organization
for Economic Cooperation and Development ("OECD"),
(c) obligations denominated in any currency issued by
international development institutions and Hong Kong, Taiwan and
OECD member governments and their agencies and instrumentalities,
and (d) corporate bonds rated Baa or higher by Moody's or BBB or
higher by S&P (or if unrated, are considered by IMI to be of
comparable quality), as well as repurchase agreements with
respect to any of the foregoing instruments. The Fund may also
invest in zero coupon bonds.
The Fund may invest less than 35% of its net assets in debt
securities rated Ba or below by Moody's or BB or below by S&P,
or, if unrated, considered by IMI to be of comparable quality
(commonly referred to as "high yield" or "junk" bonds). The Fund
will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
The Fund may invest in sponsored or unsponsored ADRs, GDRs,
ADSs and GDSs, warrants, and securities issued on a "when-issued"
or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency
contracts. The Fund may also invest up to 10% of its total assets
in other investment companies, and up to 15% of its net assets in
illiquid securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may reduce its
position in Greater China growth companies and Greater China
associated companies and increase its investment in cash and
liquid debt securities, such as U.S. Government securities, bank
obligations, commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may
also borrow up to 10% of the value of its total assets from
banks.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
Ivy Developing Nations Fund : The Fund's principal
objective is long-term growth. Consideration of current income is
secondary to this principal objective. In pursuing its objective,
the Fund invests primarily in the equity securities of companies
that IMI believes will benefit from the economic development and
growth of emerging markets. The Fund considers countries having
emerging markets to be those that (i) are generally considered to
be "developing" or "emerging" by the World Bank and the
International Finance Corporation, or (ii) are classified by the
United Nations (or otherwise regarded by their authorities) as
"emerging." Under normal market conditions, the Fund invests at
least 65% of its total assets in equity securities (including
common and preferred stocks, convertible debt obligations,
warrants, options (subject to the restrictions set forth below),
rights, and sponsored or unsponsored ADRs, GDRs, ADSs and GDSs
that are listed on stock exchanges or traded over-the-counter) of
"Emerging Market growth companies," which are defined as
companies (a) for which the principal securities trading market
is an emerging market (as defined above), (b) that each (alone or
on a consolidated basis) derives 50% or more of its total revenue
either from goods, sales or services in emerging markets, or
(c) that are organized under the laws of (and with a principal
office in) an emerging market country.
The Fund normally invests its assets in the securities of
issuers located in at least three emerging market countries, and
may invest 25% or more of its total assets in the securities of
issuers located in any one country. IMI's determination as to
whether a company qualifies as an Emerging Market growth company
is based primarily on information contained in financial
statements, reports, analyses and other pertinent information
(some of which may be obtained directly from the company).
For purposes of capital appreciation, the Fund may invest up
to 35% of its total assets in (i) debt securities of government
or corporate issuers in emerging market countries, (ii) equity
and debt securities of issuers in developed countries (including
the United States), and (iii) cash or cash equivalents such as
bank obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary defensive purposes, the Fund may invest
without limit in such instruments. The Fund may also invest in
zero coupon bonds and purchase securities on a "when-issued" or
firm commitment basis.
The Fund will not invest more than 20% of its total assets
in debt securities rated Ba or lower by Moody's or BB or lower by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies, and up to 15% of its net assets in illiquid
securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY GLOBAL FUND: The Fund seeks long-term capital growth
through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation. Any
income realized will be incidental. Under normal conditions, the
Fund will invest at least 65% of its total assets in the common
stock of companies throughout the world, with at least three
different countries (one of which may be the United States)
represented in the Fund's overall portfolio holdings. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, sponsored or unsponsored ADRs, GDRs, ADSs and
GDSs, and investment-grade debt securities (i.e., those rated Baa
or higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero
coupon bonds.
The Fund may invest less than 35% of its net assets in debt
securities rated Ba or below by Moody's or BB or below by S&P, or
if unrated, considered by IMI to be of comparable quality
(commonly referred to as "high yield" or "junk" bonds). The Fund
will not invest in debt securities rated less than C by either
Moody's or S&P. As of December 31, 1997, the Fund had 1.05% of
its total assets invested in low-rated debt securities.
The Fund may invest in equity real estate investment trusts,
warrants, and securities issued on a "when-issued" or firm
commitment basis, and may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies and up to 15% of its net assets in illiquid
securities. The Fund may not, as a matter of fundamental policy,
invest more than 5% of its total assets in restricted securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may invest without
limit in U.S. Government securities, obligations issued by
domestic or foreign banks (including certificates of deposit,
time deposits and bankers' acceptances), and domestic or foreign
commercial paper (which, if issued by a corporation, must be
rated Prime-1 by Moody's or A-1 by S&P, or if unrated has been
issued by a company that at the time of investment has an
outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock indices,
provided the premium paid for such options does not exceed 10% of
the Fund's net assets. The Fund may also sell covered put options
with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% of the
Fund's net assets is subject to being purchased upon the exercise
of the calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of its total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment
objective is long-term growth. Any income realized will be
incidental. Under normal conditions, the Fund invests at least
65% of its total assets in the equity securities of companies
throughout the world that own, explore or develop natural
resources and other basic commodities, or supply goods and
services to such companies. Under this investment policy, at
least three different countries (one of which may be the United
States) will be represented in the Fund's overall portfolio
holdings. "Natural resources" generally include precious metals
(such as gold, silver and platinum), ferrous and nonferrous
metals (such as iron, aluminum and copper), strategic metals
(such as uranium and titanium), coal, oil, natural gases, timber,
undeveloped real property and agricultural commodities. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may
also invest directly in precious metals and other physical
commodities.
MFC believes that certain political and economic changes in
the global environment in recent years have had and will continue
to have a profound effect on global supply and demand of natural
resources, and that rising demand from developing markets and new
sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, MFC will seek
to identify securities of companies that, in MFC's opinion,
appear to be undervalued relative to the value of the companies'
natural resource holdings.
For temporary defensive purposes, the Fund may invest
without limit in cash or cash equivalents, such as bank
obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. For temporary or emergency purposes, the Fund may
borrow up to one-third of the value of its total assets from
banks, but may not purchase securities at any time during which
the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest up to 10% of its
total assets in other investment companies and up to 15% of its
net assets in illiquid securities.
For hedging purposes only, the Fund may engage in
transactions in (and options on) foreign currency futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's principal
investment objective is long-term capital growth. Any income
realized will be incidental. Under normal conditions, the Fund
will invest at least 65% of its total assets in the common stock
of companies that are expected to benefit from the development,
advancement and use of science and technology. Under this
investment policy, at least three different countries (one of
which may be the United States) will be represented in the Fund's
overall portfolio holdings. Industries likely to be represented
in the Fund's portfolio include computers and peripheral
products, software, electronic components and systems,
telecommunications, media and information services,
pharmaceuticals, hospital supply and medical devices,
biotechnology, environmental services, chemicals and synthetic
materials, and defense and aerospace. The Fund may also invest in
companies that are expected to benefit indirectly from the
commercialization of technological and scientific advances. In
recent years, rapid advances in these industries have stimulated
unprecedented growth. While this is no guarantee of future
performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it may
also invest in preferred stock, securities convertible into
common stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs
and investment-grade debt securities (i.e., those rated Baa or
higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero
coupon bonds. The Fund may also invest up to 5% of its net assets
in debt securities that are rated Ba or below by Moody's or BB or
below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). The Fund will not invest in debt securities rated
less than C by either Moody's or S&P. As of December 31, 1997,
the Fund held no low-rated debt securities.
The Fund may invest in warrants, purchase securities on a
"when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies and (ii) up to 15% of
its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI
believes that circumstances warrant, the Fund may invest without
limit in U.S. Government securities, obligations issued by
domestic or foreign banks (including certificates of deposit,
time deposits and bankers' acceptances), and domestic or foreign
commercial paper (which, if issued by a corporation, must be
rated Prime-1 by Moody's or A-1 by S&P, or if unrated has been
issued by a company that at the time of investment has an
outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock indices
and on individual securities, provided the premium paid for such
options does not exceed 10% of the value of the Fund's net
assets. The Fund may also sell covered put options with respect
to up to 50% of the value of its net assets, and may write
covered call options so long as not more than 20% of the Fund's
net assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of the value of its total
assets.
IVY INTERNATIONAL FUND II: The Fund's principal objective
is long-term capital growth primarily through investment in
equity securities. Consideration of current income is secondary
to this principal objective. It is anticipated that at least 65%
of the Fund's total assets will be invested in common stocks (and
securities convertible into common stocks) principally traded in
European, Pacific Basin and Latin American markets. Under this
investment policy, at least three different countries (other than
the United States) will be represented in the Fund's overall
portfolio holdings. For temporary defensive purposes, the Fund
may also invest in equity securities principally traded in
U.S. markets. IMI, the Fund's investment manager, invests the
Fund's assets in a variety of economic sectors, industry segments
and individual securities in order to reduce the effects of price
volatility in any one area and to enable shareholders to
participate in markets that do not necessarily move in concert
with U.S. markets. IMI seeks to identify rapidly expanding
foreign economies, and then searches out growing industries and
corporations, focusing on companies with established records.
Individual securities are selected based on value indicators,
such as a low price-earnings ratio, and are reviewed for
fundamental financial strength. Companies in which investments
are made will generally have at least $1 billion in
capitalization and a solid history of operations.
When economic or market conditions warrants, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities (i.e., those rated Baa or higher
by Moody's or BBB or higher by S&P, or if unrated, considered by
IMI to be of comparable quality), preferred stocks, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, warrants, or cash or cash
equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements. For temporary or emergency
purposes, the Fund may borrow up to 10% of the value of its total
assets from banks. The Fund may also purchase securities on a
"when-issued" or firm commitment basis, and may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest up to 10% of its
total assets in other investment companies and up to 15% of its
net assets in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's
principal investment objective is long-term growth primarily
through investment in foreign equity securities. Consideration of
current income is secondary to this principal objective. Under
normal circumstances the Fund invests at least 65% of its total
assets in common and preferred stocks (and securities convertible
into common stocks) of foreign issuers having total market
capitalization of less than $1 billion. Under this investment
policy, at least three different countries (other than the United
States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in the United
States. The Fund will invest its assets in a variety of economic
sectors, industry segments and individual securities in order to
reduce the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily
move in concert with the U.S. market. The factors that IMI
considers in determining the appropriate distribution of
investments among various countries and regions include prospects
for relative economic growth, expected levels of inflation,
government policies influencing business conditions and the
outlook for currency relationships.
In selecting the Fund's investments, IMI will seek to
identify securities that are attractively priced relative to
their intrinsic value. The intrinsic value of a particular
security is analyzed by reference to characteristics such as
relative price-earnings ratio, dividend yield and other relevant
factors (such as applicable financial, tax, social and political
conditions).
When economic or market conditions warrant, the Fund may
invest without limit in U.S. Government securities,
investment-grade debt securities, zero coupon bonds, preferred
stocks, warrants, or cash or cash equivalents such as bank
obligations (including certificates of deposit and bankers'
acceptances), commercial paper, short-term notes and repurchase
agreements. The Fund may also invest up to 5% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities.
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment
objective is long-term capital growth. Consideration of current
income is secondary to this principal objective. The Fund seeks
to achieve its investment objective by investing primarily in the
equity securities of companies domiciled or otherwise doing
business (as described below) in European countries. Under normal
circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of "European companies," which
include any issuer (a) that is organized under the laws of a
European country; (b) that derives 50% or more of its total
revenues from goods produced or sold, investments made or
services performed in Europe; or (c) for which the principal
trading market is in Europe. The Fund may also invest up to 35%
of its total assets in the equity securities of issuers domiciled
outside of Europe. The equity securities in which the Fund may
invest include common stock, preferred stock and common stock
equivalents such as warrants and convertible debt securities. The
Fund may also invest in sponsored or unsponsored ADRs, European
Depository Receipts ("EDRs"), GDRs, ADSs, European Depository
Shares ("EDSs") and GDSs. The Fund does not expect to concentrate
its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt
securities, but will not invest more than 20% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P, or if unrated, are considered by IMI to be of comparable
quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by
either Moody's or S&P. As of December 31, 1997, the Fund held no
low-rated debt securities. The Fund may also purchase securities
on a "when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. In addition, the Fund may invest up to 5% of
its net assets in zero coupon bonds.
For temporary defensive purposes or when IMI believes that
circumstances warrant, the Fund may invest without limit in
U.S. Government securities, investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by
S&P, or if unrated, are considered by IMI to be of comparable
quality), warrants, and cash or cash equivalents such as domestic
or foreign bank obligations (including certificates of deposit,
time deposits and bankers' acceptances), short-term notes,
repurchase agreements, and domestic or foreign commercial paper
(which, if issued by a corporation, must be rated Prime-1 by
Moody's or A-1 by S&P, or if unrated has been issued by a company
that at the time of investment has an outstanding debt issue
rated Aaa or Aa by Moody's or AAA or AA by S&P).
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may also invest (i) up to 10% of its total
assets in other investment companies, and (ii) up to 15% of its
net assets in illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
Ivy South America Fund : The Fund's principal
investment objective is long-term capital growth. Consideration
of current income is secondary to this principal objective. Under
normal conditions the Fund invests at least 65% of its total
assets in securities issued in South America. Securities of South
American issuers include (a) securities of companies organized
under the laws of a South American country or for which the
principal securities trading market is in South America;
(b) securities that are issued or guaranteed by the government of
a South American country, its agencies or instrumentalities,
political subdivisions or the country's central bank;
(c) securities of a company, wherever organized, where at least
50% of the company's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets
or activities located in South America; or (d) any of the
preceding types of securities in the form of depository shares.
The Fund may participate, however, in markets throughout Latin
America, which for purposes of this Prospectus is defined as
Mexico, Central America, South America and the Spanish-speaking
islands of the Caribbean, and it is expected that the Fund will
be invested at all times in at least three countries. Under
present conditions, the Fund expects to focus its investments in
Argentina, Brazil, Chile, Colombia, Peru and Venezuela, which IMI
believes are the most developed capital markets in South America.
The Fund does not expect to concentrate its investments in any
particular industry.
The Fund's equity investments consist of common stock,
preferred stock (either convertible or non-convertible),
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs, and warrants
(any of which may be purchased through rights). The Fund's equity
securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market.
The Fund may invest in debt securities (including zero
coupon bonds) when IMI anticipates that the potential for capital
appreciation from debt securities is likely to equal or exceed
that of equity securities (e.g., a favorable change in relative
foreign exchange rates, interest rate levels or the
creditworthiness of issuers). These include debt securities
issued by South American Governments ("Sovereign Debt"). Most of
the debt securities in which the Fund may invest are not rated,
and those that are rated are expected to be below
investment-grade (i.e., rated Ba or below by Moody's or BB or
below by S&P, or considered by IMI to be of comparable quality),
and are commonly referred to as "high yield" or "junk" bonds. As
of December 31, 1997, the Fund held no low-rated debt securities.
To meet redemptions, or while the Fund is anticipating
investments in South American securities, the Fund may hold cash
or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial
paper, short-term notes and repurchase agreements. For temporary
defensive or emergency purposes, the Fund may (i) invest without
limit in such instruments, and (ii) borrow up to one-third of the
value of its total assets from banks (but may not purchase
securities at any time during which the value of the Fund's
outstanding loans exceeds 10% of the value of the Fund's total
assets).
The Fund may purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest up to 10% of its total assets in other
investment companies, and up to 15% of its net assets in illiquid
securities. The Fund will treat as illiquid any South American
securities that are subject to restrictions on repatriation for
more than seven days, as well as any securities issued in
connection with South American debt conversion programs that are
restricted to remittance of invested capital or profits.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
RISK FACTORS
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, a Fund may invest in time deposits in
banks or savings and loan associations. Time deposits are
generally similar to certificates of deposit, but are
uncertificated. A Fund's investments in certificates of deposit,
time deposits, and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, (ii) U.S. banks which do not meet the $1 billion asset
requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the
"FDIC"), (iii) savings and loan associations which have total
assets in excess of $1 billion and which are members of the FDIC,
and (iv) foreign banks if the obligation is, in IMI's opinion, of
an investment quality comparable to other debt securities which
may be purchased by the particular Fund. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
BORROWING
Borrowing may exaggerate the effect on a Fund's net asset
value of any increase or decrease in the value of the Fund's
portfolio securities. Money borrowed will be subject to interest
costs (which may include commitment fees and/or the cost of
maintaining minimum average balances). Although the principal of
a Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus
increasing exposure to capital risk. All borrowings will be
repaid before any additional investments are made.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies,
corporations and finance companies. A Fund may invest in
commercial paper that is rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 by Standard & Poor's Corporation
("S&P") or, if not rated by Moody's or S&P, is issued by
companies having an outstanding debt issue rated Aaa or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES
The convertible securities in which a Fund may invest
include corporate bonds, notes, debentures, preferred stock and
other securities that may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common
stock. Investments in convertible securities can provide income
through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or
exchange features. Because convertible securities can be
converted into equity securities, their values will normally vary
in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield
than the underlying equity, however, so that the price decline of
a convertible security may sometimes be less substantial than
that of the underlying equity security. The exchange ratio for
any particular convertible security may be adjusted from time to
time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio.
Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both
debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the
market value of convertible securities typically changes as the
market value of the underlying common stock changes, and,
therefore, also tends to follow movements in the general market
for equity securities. When the market price of the underlying
common stock increases, the price of a convertible security tends
to rise as a reflection of the value of the underlying common
stock, although typically not as much as the price of the
underlying common stock. While no securities investments are
without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same
issuer.
As debt securities, convertible securities are investments
that provide for a stream of income. Like all debt securities,
there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their
obligations (see following section). Convertible securities
generally offer lower yields than non-convertible securities of
similar quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
DEBT SECURITIES
IN GENERAL. Investing in debt securities involves both
interest rate and credit risk. Generally, the value of debt
instruments rises and falls inversely with fluctuations in
interest rates. As interest rates decline, the value of debt
securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds
with longer maturities generally are more volatile than bonds
with shorter maturities. The market value of debt securities also
varies according to the relative financial condition of the
issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury
(such as Treasury bills, notes, and bonds) and (2) Federal agency
obligations guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, which are mortgage-backed
securities). When such securities are held to maturity, the
payment of principal and interest is unconditionally guaranteed
by the U.S. Government, and thus they are of the highest possible
credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to
fluctuations in interest rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayments tends to
increase, thereby shortening the actual average life of the
security. Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the actual average life
of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates, and may involve significantly greater
price and yield volatility than traditional debt securities.
Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association and Student Loan Marketing Association.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay principal is very
strong and differs from the highest rated issues only to a small
degree). Bonds rated A are viewed as having many favorable
investment attributes, but elements may be present that suggest a
susceptibility to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade"
obligations) are considered to have an adequate capacity to pay
interest and repay principal, but certain protective elements may
be lacking (i.e., such bonds lack outstanding investment
characteristics and have some speculative characteristics). A
Fund may invest in debt securities that are given an investment-
grade rating by Moody's or S&P, and may also invest in unrated
debt securities that are considered by IMI to be of comparable
quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa
or BBB and comparable unrated securities (commonly referred to as
"high yield" or "junk" bonds) are considered to be predominantly
speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The lower the ratings of
corporate debt securities, the more their risks render them like
equity securities. Such securities carry a high degree of risk
(including the possibility of default or bankruptcy of the
issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be
less liquid) than securities in the higher rating categories.
(See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective
characteristics.)
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issuers may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect a Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of a Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of a Fund's investment objectives by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of a Fund to retain
or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, Federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
While IMI may refer to ratings issued by established credit
rating agencies, it is not IMI's policy to rely exclusively on
such ratings, but rather to supplement such ratings with its own
independent and ongoing review of credit quality. A Fund's
achievement of its investment objective may, to the extent of its
investment in low-rated debt securities, be more dependent upon
IMI's credit analysis than would be the case if the Funds were
investing in higher quality bonds. Should the rating of a
portfolio security be downgraded, IMI will determine whether it
is in the affected Fund's best interest to retain or dispose of
the security. However, should any individual bond held by a Fund
be downgraded below a rating of C, IMI currently intends to
dispose of such bond based on then existing market conditions.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations
issued without any requirement for the periodic payment of
interest. Zero coupon bonds are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though funds
representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds. The
potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund
being forced to sell portfolio securities at a time when it might
otherwise choose not to sell these securities and when the Fund
might incur a capital loss on such sales. Because interest on
zero coupon obligations is not distributed to the Fund on a
current basis, but is in effect compounded, the value of such
securities of this type is subject to greater fluctuations in
response to changing interest rates than the value of debt
obligations which distribute income regularly.
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES
New issues of certain debt securities are often offered on a
"when-issued" basis, meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, the Fund
will maintain in a segregated account with its Custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date (usually
less than a year), and typically is individually negotiated and
privately traded by currency traders and their customers. A
forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although
foreign exchange dealers do not charge a fee for commissions,
they do realize a profit based on the difference between the
price at which they are buying and selling various currencies.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, at
the same time, they tend to limit any potential gain which might
result should the value of such currencies increase.
While a Fund may enter into forward contracts to reduce
currency exchange risks, changes in currency exchange rates may
result in poorer overall performance for a Fund than if it had
not engaged in such transactions. Moreover, there may be an
imperfect correlation between a Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by that Fund. An imperfect correlation of
this type may prevent a Fund from achieving the intended hedge or
expose the Fund to the risk of currency exchange loss.
A Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the
contract would obligate the Fund to deliver an amount of currency
in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Further, a Fund
generally will not enter into a forward contract with a term of
greater than one year.
A Fund will hold cash or liquid securities in a segregated
account with its Custodian in an amount equal (on a daily marked-
to-market basis) to the amount of the commitments under these
contracts. At the maturity of a forward contract, a Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an offsetting
contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a
party to the original forward contract.
FOREIGN SECURITIES
A Fund may invest in securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored American Depository
Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs"), Global Depository Shares ("GDSs")
and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in the Funds' domestic investments.
Although each Fund's Advisor intends to invest the Fund's
assets only in nations that are generally considered to have
relatively stable and friendly governments, there is the
possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer currency from a
given country), default on foreign government securities,
political or social instability or diplomatic developments which
could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. Moreover, foreign companies are not generally subject
to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less governmental supervision and
regulation of business and industry practices, stock exchanges,
brokers, and listed companies than in the United States. Foreign
securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign
securities markets of many of the countries in which a Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In addition, a
Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no
return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could
cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to
settlement problems could result either in losses to a Fund
because of subsequent declines in the value of the portfolio
security or, if a Fund has entered into a contract to sell the
security, in possible liability to the purchaser. Fixed
commissions on some foreign securities exchanges are generally
higher than negotiated commissions on U.S. exchanges, although
IMI will endeavor to achieve the most favorable net results on a
Fund's portfolio transactions. It may be more difficult for a
Fund's agents to keep currently informed about corporate actions
such as stock dividends or other matters that may affect the
prices of portfolio securities. Communications between the
United States and foreign countries may be less reliable than
within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for
portfolio securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate the risks to
a Fund associated with the foregoing considerations through
investment variation and continuous professional management.
DEPOSITORY RECEIPTS. ADRs, GDRs and similar instruments,
the issuance of which is typically administered by a U.S. or
foreign bank or trust company, evidence ownership of underlying
securities issued by a U.S. or foreign corporation. ADRs are
publicly traded on exchanges or over-the-counter ("OTC") in the
United States. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying
securities. As a result, information concerning the issuer may
not be as current or as readily available as in the case of
sponsored depository instruments, and their prices may be more
volatile than if they were sponsored by the issuers of the
underlying securities.
EMERGING MARKETS. Certain Funds could have significant
investments in securities traded in emerging markets. Investors
should recognize that investing in such countries involves
special considerations, in addition to those set forth above,
that are not typically associated with investing in United States
securities and that may affect a Fund's performance favorably or
unfavorably.
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility;
(iii) certain national policies that may restrict a Fund's
investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until
relatively recently in certain Eastern European countries, of a
capital market structure or market-oriented economy; (vii) the
possibility that recent favorable economic developments in
Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the
possibility that currency devaluations could adversely affect the
value of a Fund's investments. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, a Fund could
lose a substantial portion of any investments it has made in the
affected countries. Further, few (if any) accounting standards
exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial in relation to
the actual market values and may be adverse to a Fund's net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of a Fund's assets invested in such
country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to
the custody of a Fund's cash and securities, that Fund's
investment in such countries may be limited or may be required to
be effected through intermediaries. The risk of loss through
governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES. Investment in foreign securities
usually will involve currencies of foreign countries. A Fund may
also temporarily hold funds in bank deposits in foreign
currencies during the completion of investment programs and may
purchase forward foreign currency contracts. Because of these
factors, the value of the assets of a Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions
between various currencies. Although the Funds' Custodian values
each Fund's assets daily in terms of U.S. dollars, the Funds
generally do not convert their holdings of foreign currencies
into U.S. dollars on a daily basis. A Fund will do so from time
to time, however, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. A Fund will conduct its
foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to
purchase or sell foreign currencies.
Because a Fund normally will be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in U.S. markets. A Fund's
share price will reflect the movements of both the different
stock and bond markets in which it is invested (both U.S. and
foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar
against foreign currencies may account for part of a Fund's
investment performance. U.S. and foreign securities markets do
not always move in step with each other, and the total returns
from different markets may vary significantly. In addition,
significant uncertainty surrounds the proposed introduction of
the euro (a common currency for the European Union) in January
1999 and its effect on the value of securities denominated in
local European currencies. These and other currencies in which
the Funds' assets are denominated may be devalued against the
U.S. dollar, resulting in a loss to the Funds.
CONCENTRATION RISKS
THE ASIA-PACIFIC REGION. Certain Asia-Pacific countries in
which Ivy Asia Pacific Fund is likely to invest are developing
countries, and may be in the initial stages of their
industrialization cycle. The economic structures of developing
countries generally are less diverse and mature than in the
United States, and their political systems may be relatively
unstable. Historically, markets of developing countries have
been more volatile than the markets of developed countries, yet
such markets often have provided higher rates of return to
investors.
Investing in securities of issuers in Asia-Pacific countries
involves certain considerations not typically associated with
investing in securities issued in the United States or in other
developed countries, including (i) restrictions on foreign
investment and on repatriation of capital invested in Asian
countries, (ii) currency fluctuations, (iii) the cost of
converting foreign currency into United States dollars, (iv)
potential price volatility and lesser liquidity of shares traded
on Asia-Pacific securities markets and (v) political and economic
risks, including the risk of nationalization or expropriation of
assets and the risk of war.
Certain Asia-Pacific countries may be more vulnerable to the
ebb and flow of international trade and to trade barriers and
other protectionist or retaliatory measures. Investments in
countries that have recently opened their capital markets and
that appear to have relaxed their central planning requirement,
as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions in foreign
markets in general may be longer than in domestic markets, and
such delays may be of particular concern in developing countries.
For example, the possibility of political upheaval and the
dependence on foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some
Asia-Pacific countries are subject to less regulatory scrutiny
than in the United States. In addition, due to the limited size
of the markets for Asia-Pacific securities, the prices for such
securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
THE CHINA REGION. Investors in Ivy China Region Fund should
be aware that many of the China Region countries in which the
Fund is likely to invest may be subject to a greater degree of
economic, political and social instability than is the case in
the United States or other developed countries. Among the
factors causing this instability are (i) authoritarian
governments or military involvement in political and economic
decision making, (ii) popular unrest associated with demands for
improved political, economic and social conditions, (iii)
internal insurgencies, (iv) hostile relations with neighboring
countries, (v) ethnic, religious and racial disaffection, and
(vi) changes in trading status, any one of which could disrupt
the principal financial markets in which the Ivy China Region
Fund invests and adversely affect the value of its assets.
China Region countries tend to be heavily dependent on
international trade, as a result of which their markets are
highly sensitive to protective trade barriers and the economic
conditions of their principal trading partners (i.e., the United
States, Japan and Western European countries). Protectionist
trade legislation, reduction of foreign investment in China
Region economies and general declines in the international
securities markets could have a significant adverse effect on the
China Region securities markets. In addition, certain China
Region countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated
the assets of private companies. There is a heightened risk in
these countries that such adverse actions might be repeated.
To the extent that any China Region country experiences
rapid increases in its money supply or investment in equity
securities for speculative purposes, the equity securities traded
in such countries may trade at price-earning multiples higher
than those of comparable companies trading on securities markets
in the United States, which may not be sustainable. Finally,
restriction on foreign investment exists to varying degrees in
some China Region countries. Where such restrictions apply,
investments may be limited and may increase the Fund's expenses.
See also "Selected Economic and Market Data for Asia Pacific and
China Region Countries" in Appendix B to this SAI.
CANADIAN SECURITIES. Ivy Canada Fund invests primarily in
Canadian securities. The Canadian securities market is among the
largest in the world. Equity securities are traded primarily on
the country's five independent regional stock exchanges: The
Toronto Stock Exchange ("TSE"), the Montreal Exchange ("ME"), the
Vancouver Stock Exchange ("VSE"), the Alberta Stock Exchange and
the Winnipeg Stock Exchange. The TSE, which is the largest
regional exchange, had a total market capitalization of $1190.8
billion as of November 1996 and its 1,304 listed companies had a
November 1996 trading volume of 2,610,118,602 shares. A small
percentage of Canadian stocks are traded on the unlisted or OTC
market. In contrast, almost all debt securities are traded on
the OTC. Interlisting is common among the Canadian and U.S.
stock exchanges and the OTC markets. In addition, the TSE, the
American Stock Exchange and the Midwest Stock Exchange are
electronically linked to permit the order routing of interlisted
securities on those stock exchanges. The ME and the Boston Stock
Exchange are similarly linked. Ivy Canada Fund invests less than
1% of its assets in securities listed solely on the VSE.
The economy of Canada is strongly influenced by the
activities of companies and industries involved in the production
and processing of natural resources. The companies may include
those involved in the energy industry, industrial materials
(chemicals, base metals, timber and paper) and agricultural
materials (grain cereals). The securities of companies in the
energy industry are subject to changes in value and dividend
yield, which depend, to a large extent, on the price and supply
of energy fuels. Rapid price and supply fluctuations may be
caused by events relating to international politics, energy
conservation and the success of exploration projects. Economic
prospects are changing due to recent government attempts to
reduce restrictions against foreign investment.
Many factors, including social, environmental and economic
conditions, that are not within the control of Canada affect and
could have an adverse impact on the financial condition of
Canada. IMI is unable to predict what effect, if any, such
factors would have on instruments held in a Fund's portfolio.
Beginning in January of 1989 the U.S. - Canada Free Trade
Agreement will be phased in over a period of 10 years. This
agreement will remove tariffs on U.S. technology and Canadian
agricultural products in addition to removing trade barriers
affecting other important sectors of each country's economy.
Additionally, the implementation of the North American Free Trade
Agreement in January 1994 is expected over time to lead to
increased trade and reduced barriers between Canada and the
United States.
Canada is one of the world's leading industrial countries,
as well as a major exporter of agricultural products. Canada is
rich in natural resources such as zinc, uranium, nickel, gold,
silver, aluminum, iron and copper. Forest covers over 44% of
land area, making Canada a leading world producer of newsprint.
Canada is also a major producer of hydroelectricity, oil and
gas. The business activities of companies in the energy field
may include the production, generation, transmission, marketing,
control or measurement of energy or energy fuels.
Canadian securities exchanges are self-regulatory agencies
that are recognized by the securities administrators of the
province in which the exchange is located. The largest, most
active Canadian exchange is the TSE, which is a self-regulated
agency recognized by the Ontario Securities Commission. Canadian
securities regulation differs in certain respects from United
States securities regulation. For example, the amount of
information available concerning companies that have securities
traded on Canadian exchanges and do not have securities traded on
an exchange in the United States is generally less than that
available concerning companies which have securities traded on
United States exchanges. See "Risk Factors and Investment
Techniques" in the Prospectus for a discussion of the risks
associated with investing in the securities of foreign companies.
NATURAL RESOURCES AND PHYSICAL COMMODITIES. Since Ivy
Global Natural Resources Fund normally invests a substantial
portion of its assets in securities of companies engaged in
natural resources activities, the Fund may be subject to greater
risks and market fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in
response to market conditions generally, and will be particularly
sensitive to the markets for those natural resources in which a
particular issuer is involved. The values of natural resources
may also fluctuate directly with respect to real and perceived
inflationary trends and various political developments. In
selecting the Fund's portfolio of investments, MFC will consider
each company's ability to create new products, secure any
necessary regulatory approvals, and generate sufficient customer
demand. A company's failure to perform well in any one of these
areas, however, could cause its stock to decline sharply.
Natural resource industries throughout the world may be
subject to greater political, environmental and other
governmental regulation than many other industries. Changes in
governmental policies and the need for regulatory approvals may
have an adverse effect on the products and services of natural
resources companies. For example, the exploration, development
and distribution of coal, oil and gas in the United States are
subject to significant Federal and state regulation, which may
affect rates of return on such investments and the kinds of
services that may be offered to companies in those industries.
In addition, many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. Such regulations may also hamper
the development of new technologies. The direction, type or
effect of any future regulations affecting natural resource
industries are virtually impossible to predict.
Ivy Global Natural Resources Fund's investments in precious
metals (such as gold) and other physical commodities are
considered speculative and subject to special risk
considerations, including substantial price fluctuations over
short periods of time. On the other hand, investments in
precious metals coins or bullion could help to moderate
fluctuations in the value of the Fund's portfolio, since the
prices of precious metals have at times tended not to fluctuate
as widely as shares of issuers engaged in the mining of precious
metals. Because precious metals and other commodities do not
generate investment income, however, the return on such
investments will be derived solely from the appreciation and
depreciation on such investments. The Fund may also incur
storage and other costs relating to its investments in precious
metals and other commodities, which may, under certain
circumstances, exceed custodial and brokerage costs associated
with investments in other types of securities. When the Fund
purchases a precious metal, MFC currently intends that it will
only be in a form that is readily marketable. Under current U.S.
tax law, the Ivy Global Natural Resources Fund may not receive
more than 10% of its yearly income from gains resulting from
selling precious metals or any other physical commodity.
Accordingly, the Fund may be required to hold its precious metals
or sell them at a loss, or to sell its portfolio securities at a
gain, when for investment reasons it would not otherwise do so.
SOUTH AMERICAN SECURITIES. Investors in Ivy South
America Fund should be aware that investing in the securities
of South American issuers may entail risks relating to the
potential political and economic instability of certain South
American countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions
on foreign investment and on repatriation of capital invested.
In the event of expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire
investment in any such country.
The securities markets of South American countries are
substantially smaller, less developed, less liquid and more
volatile than the major securities markets in the U.S. Disclosure
and regulatory standards are in many respects less stringent than
U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of
investors in such markets.
The limited size of many South American securities markets
and limited trading volume in the securities of South American
issuers compared to volume of trading in the securities of U.S.
issuers could cause prices to be erratic for reasons apart from
factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether
or not based on in-depth fundamental analysis, may decrease the
value and liquidity of portfolio securities.
Ivy South America Fund invests in securities
denominated in currencies of South American countries.
Accordingly, changes in the value of these currencies against the
U.S. dollar will result in corresponding changes in the U.S.
dollar value of the Fund's assets denominated in those
currencies.
Some South American countries also may have managed
currencies, which are not free floating against the U.S. dollar.
In addition, there is risk that certain South American countries
may restrict the free conversion of their currencies into other
countries. Further, certain South American currencies may not be
internationally traded. Certain of these currencies have
experienced a steep devaluation relative to the U.S. dollar. Any
devaluations in the currencies in which a Fund's portfolio
securities are denominated may have a detrimental impact on that
Fund's net asset value.
The economies of individual South American countries may
differ favorably or unfavorably from the U.S. economy in such
respects as the rate of growth of gross domestic product, the
rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. Certain South
American countries have experienced high levels of inflation
which can have a debilitating effect on the economy.
Furthermore, certain South American countries may impose
withholding taxes on dividends payable to a Fund at a higher rate
than those imposed by other foreign countries. This may reduce
the Fund's investment income available for distribution to
shareholders.
Certain South American countries such as Argentina, Brazil
and Mexico are among the world's largest debtors to commercial
banks and foreign governments. At times, certain South American
countries have declared moratoria on the payment of principal
and/or interest on outstanding debt. Investment in sovereign
debt can involve a high degree of risk. The governmental entity
that controls the repayment of sovereign debt may not be able or
willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's
willingness or ability to repay principal and interest due in a
timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the
economy as a whole, the governmental entity's policy towards the
International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental
entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to
reduce principal and interest arrearages on their debt. The
commitment on the part of these governments, agencies and others
to make such disbursements may be conditioned on a governmental
entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may
result in the cancellation of such third parties' commitments to
lend funds to the governmental entity, which may further impair
such debtor's ability or willingness to service its debts in a
timely manner. Consequently, governmental entities may default
on their sovereign debt.
Holders of sovereign debt, may be requested to participate
in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by
which defaulted sovereign debt may be collected in whole or in
part.
Governments of many South American countries have exercised
and continue to exercise substantial influence over many aspects
of the private sector through the ownership or control of many
companies, including some of the largest in those countries. As
a result, government actions in the future could have a
significant effect on economic conditions which may adversely
affect prices of certain portfolio securities. Expropriation,
confiscatory taxation, nationalization, political, economic or
social instability or other similar developments, such as
military coups, have occurred in the past and could also
adversely affect a Fund's investments in this region.
Changes in political leadership, the implementation of
market oriented economic policies, such as privatization, trade
reform and fiscal and monetary reform are among the recent steps
taken to renew economic growth. External debt is being
restructured and flight capital (domestic capital that has left
home country) has begun to return. Inflation control efforts
have also been implemented. South American equity markets can
be extremely volatile and in the past have shown little
correlation with the U.S. market. Currencies are typically weak,
but most are now relatively free floating, and it is not unusual
for the currencies to undergo wide fluctuations in value over
short periods of time due to changes in the market.
ILLIQUID SECURITIES
A Fund may purchase securities other than in the open
market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities" or "not readily marketable" (i.e., they cannot be
sold to the public without registration under the Securities Act
of 1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they
are subject to other legal or contractual delays in or
restrictions on resale). This investment practice, therefore,
could have the effect of increasing the level of illiquidity of a
Fund. It is a Fund's policy that illiquid securities (including
repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's
Board of Trustees has approved guidelines for use by IMI in
determining whether a security is illiquid.
Generally speaking, restricted securities may be sold (i)
only to qualified institutional buyers; (ii) in a privately
negotiated transaction to a limited number of purchasers; (iii)
in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for
which a registration statement is in effect under the 1933 Act.
Issuers of restricted securities may not be subject to the
disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded. If
adverse market conditions were to develop during the period
between a Fund's decision to sell a restricted or illiquid
security and the point at which the Fund is permitted or able to
sell such security, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted
securities, a Fund may be required to bear all or part of the
registration expenses. A Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, in such event, the Fund
may be liable to purchasers of such securities if the
registration statement prepared by the issuer is materially
inaccurate or misleading.
Since it is not possible to predict with assurance that the
market for securities eligible for resale under Rule 144A will
continue to be liquid, IMI will monitor such restricted
securities subject to the supervision of the Board of Trustees.
Among the factors IMI may consider in reaching liquidity
decisions relating to Rule 144A securities are: (1) the
frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security
and the nature of the market for the security (i.e., the time
needed to dispose of the security, the method of soliciting
offers, and the mechanics of the transfer).
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests
in real estate mortgages or equities for the benefit of its
investors. REITs are dependent upon management skill, may not be
diversified and are subject to the risks of financing projects.
Such entities are also subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended (the "Code"), and to
maintain exemption from the 1940 Act. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his
or her proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys
a money market instrument and obtains a simultaneous commitment
from the seller to repurchase the instrument at a specified time
and at an agreed-upon yield. Under guidelines approved by the
Board, a Fund is permitted to enter into repurchase agreements
only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other
securities that IMI has approved for use as collateral for
repurchase agreements and the collateral must be marked-to-market
daily. A Fund will enter into repurchase agreements only with
banks and broker-dealers deemed to be creditworthy by its Adviser
under the above-referenced guidelines. In the unlikely event of
failure of the executing bank or broker-dealer, a Fund could
experience some delay in obtaining direct ownership of the
underlying collateral and might incur a loss if the value of the
security should decline, as well as costs in disposing of the
security.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of small or new companies may be subject to more
abrupt or erratic market movements because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
WARRANTS
The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in a tandem with the prices of
the underlying securities, and are, therefore, considered
speculative investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a warrant held by
a Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. A Fund may engage in transactions in options on
securities and stock indices in accordance with its stated
investment objective and policies. A Fund may also purchase put
options on securities and may purchase and sell (write) put and
call options on stock indices. Options on securities and stock
indices purchased or written by a Fund will be limited to options
traded on national securities exchanges, boards of trade or
similar entities, or in the OTC markets.
A call option is a short-term contract (having a duration of
less than one year) pursuant to which the purchaser, in return
for the premium paid, has the right to buy the security
underlying the option at the specified exercise price at any time
during the term of the option. The writer of the call option,
who receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment of
the exercise price. A put option is a similar contract pursuant
to which the purchaser, in return for the premium paid, has the
right to sell the security underlying the option at the specified
exercise price at any time during the term of the option. The
writer of the put option, who receives the premium, has the
obligation, upon exercise of the option, to buy the underlying
security at the exercise price. The premium paid by the
purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the time remaining to
expiration of the option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the
Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the
exercise of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing
sale transaction can be effected at any particular time or at any
acceptable price. If any call or put option is not exercised or
sold, it will become worthless on its expiration date.
A Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by
the Fund if the premium, plus commission costs, paid by the Fund
to purchase the call or the put is less (or greater) than the
premium, less commission costs, received by the Fund on the sale
of the call or the put. A gain also will be realized if a call
or a put that a Fund has written lapses unexercised, because the
Fund would retain the premium. Any such gains (or losses) are
considered short-term capital gains (or losses) for Federal
income tax purposes. Net short-term capital gains, when
distributed by a Fund, are taxable as ordinary income. See
"Taxation."
A Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put previously purchased
by the Fund if the premium, less commission costs, received by
the Fund on the sale of the call or the put is greater (or less)
than the premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date, and
a Fund will realize a loss in the amount of the premium paid,
plus commission costs. Any such gain or loss will be long-term
or short-term gain or loss, depending upon a Fund's holding
period for the option.
Exchange-traded options generally have standardized terms
and are issued by a regulated clearing organization (such as the
Options Clearing Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by a Fund and
its counterparty (usually a securities dealer or a financial
institution) with no clearing organization guarantee. When a
Fund purchases an OTC option, it relies on the party from whom it
has purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty fails
to do so, a Fund will lose any premium paid for the option, as
well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to
determine the likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may write
(sell) covered call options on the Fund's securities in an
attempt to realize a greater current return than would be
realized on the securities alone. A Fund may also write covered
call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the
options). In view of the investment objectives of a Fund, the
Fund generally would write call options only in circumstances
where the investment adviser to the Fund does not anticipate
significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A Fund may write covered call options as described in the
Fund's Prospectus. A "covered" call option means generally that
so long as the Fund is obligated as the writer of a call option,
the Fund will (i) own the underlying securities subject to the
option, or (ii) have the right to acquire the underlying
securities through immediate conversion or exchange of
convertible preferred stocks or convertible debt securities owned
by the Fund. Although a Fund receives premium income from these
activities, any appreciation realized on an underlying security
will be limited by the terms of the call option. A Fund may
purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, a Fund receives a premium
for undertaking the obligation to sell the underlying security at
a fixed price during the option period, if the option is
exercised. So long as a Fund remains obligated as a writer of a
call option, it forgoes the opportunity to profit from increases
in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents
such a profit (and retains the risk of loss should the value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. A Fund may
purchase a put option on an underlying security owned by the Fund
as a defensive technique in order to protect against an
anticipated decline in the value of the security. A Fund, as the
holder of the put option, may sell the underlying security at the
exercise price regardless of any decline in its market price. In
order for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise
price to cover the premium and transaction costs that a Fund must
pay. These costs will reduce any profit a Fund might have
realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce
any capital gain otherwise available for distribution when the
security is eventually sold. The purchase of put options will
not be used by a Fund for leveraging purposes.
A Fund may also purchase a put option on an underlying
security that it owns and at the same time write a call option on
the same security with the same exercise price and expiration
date. Depending on whether the underlying security appreciates
or depreciates in value, a Fund would sell the underlying
security for the exercise price either upon exercise of the call
option it has written or by exercising the put option it holds.
A Fund would enter into such transactions in order to profit from
the difference between the premium received by the Fund for the
writing of the call option and the premium paid by the Fund for
the purchase of the put option, thereby increasing the Fund's
current return. A Fund may write (sell) put options on
individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. A
Fund may purchase and sell (write) put and call options on
securities indices. An index assigns relative values to the
securities included in the index and the index fluctuates with
changes in the market values of the securities so included.
Options on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a specified
price, they give the purchaser the right to receive cash. The
amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiple (the
"multiplier"). The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function
similar to the unit of trading for a stock option. It determines
the total dollar value per contract of each point in the
difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on
different indices have different multipliers.
When a Fund writes a call or put option on a stock index,
the option is "covered", in the case of a call, or "secured", in
the case of a put, if the Fund maintains in a segregated account
with the Custodian cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain special risks. During the option
period, the covered call writer, in return for the premium on the
option, has given up the opportunity to profit from a price
increase in the underlying securities above the exercise price,
but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must
deliver the underlying securities (or cash in the case of an
index option) at the exercise price. If a put or call option
purchased by a Fund is not sold when it has remaining value, and
if the market price of the underlying security (or index), in the
case of a put, remains equal to or greater than the exercise
price or, in the case of a call, remains less than or equal to
the exercise price, a Fund will lose its entire investment in the
option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements
in a related security (or securities), the price of the put or
call option may move more or less than the price of the related
security (or securities). In this regard, there are differences
between the securities and options markets that could result in
an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. Furthermore,
if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position. Finally,
trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the
price has risen or fallen more than the maximum amount specified
by the exchange. Closing transactions can be made for OTC
options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists.
There is no assurance that a Fund will be able to close out an
OTC option position at a favorable price prior to its expiration.
In the event of insolvency of the counterparty, a Fund might be
unable to close out an OTC option position at any time prior to
its expiration. Although a Fund may be able to offset to some
extent any adverse effects of being unable to liquidate an option
position, the Fund may experience losses in some cases as a
result of such inability.
A Fund's options activities may impact the level of its
portfolio turnover and brokerage commissions. See "Portfolio
Turnover."
A Fund's success in using options techniques depends, among
other things, on the Advisor's ability to predict accurately the
direction and volatility of price movements in the options and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS
IN GENERAL. A Fund may enter into futures contracts for
hedging purposes. A futures contract provides for the future
sale by one party and purchase by another party of a specified
quantity of a commodity at a specified price and time. When a
purchase or sale of a futures contract is made by a Fund, the
Fund is required to deposit with its Custodian (or broker, if
legally permitted) in a segregated account a specified amount of
cash or liquid securities ("initial margin"). The margin
required for a futures contract is set by the exchange on which
the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance
bond or good faith deposit on the futures contract which is
returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied. A futures
contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does
not represent a borrowing or loan by a Fund but is instead a
settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In
computing daily net asset value, the Fund will mark-to-market its
open futures position.
Although some futures contracts call for making or taking
delivery of the underlying securities, generally these
obligations are closed out prior to delivery of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations. When purchasing a
futures contract, a Fund will maintain with its Custodian in a
segregated account (and mark-to-market on a daily basis) cash or
liquid securities that, when added to the amounts deposited with
a futures commission merchant ("FCM") as margin, are equal to the
market value of the futures contract.
When selling a futures contact, a Fund will maintain with
its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract.
A Fund will only enter into futures contracts which are
standardized and traded on a U.S. or foreign exchange, board of
trade, or similar entity or quoted on an automated quotation
system. A Fund will not enter into a futures contract if,
immediately thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. A
Fund may engage in foreign currency futures contracts and related
options transactions for hedging purposes. A foreign currency
futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a foreign
currency at a specified price and time.
An option on a foreign currency futures contract gives the
holder the right, in return for the premium paid, to assume a
long position (call) or short position (put) in a futures
contract at a specified exercise price at any time during the
period of the option. Upon the exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true.
A Fund may purchase call and put options on foreign
currencies as a hedge against changes in the value of the U.S.
dollar (or another currency) in relation to a foreign currency in
which portfolio securities of the Fund may be denominated. A
call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of
foreign currency at a specified price during a fixed period of
time. The Fund may invest in options on foreign currency which
are either listed on a domestic securities exchange or traded on
a recognized foreign exchange.
In those situations where foreign currency options may not
be readily purchased (or where such options may be deemed
illiquid) in the currency in which the hedge is desired, the
hedge may be obtained by purchasing an option on a "surrogate"
currency (i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies).
A surrogate currency's exchange rate movements parallel that of
the primary currency. Surrogate currencies are used to hedge an
illiquid currency risk, when no liquid hedge instruments exist in
world currency markets for the primary currency.
A Fund will only enter into currency futures contracts and
futures options that are standardized and traded on a U.S. or
foreign exchange, board of trade, or similar entity or quoted on
an automated quotation system. A Fund will not enter into a
futures contract or purchase an option thereon if, immediately
thereafter, the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open
futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into. A call
option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A
put option is "in the money" if the exercise price exceeds the
value of the futures contract that is the subject of the option.
For additional information about margin deposits required with
respect to futures contracts and options thereon, see "Futures
Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. A
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can
be no guarantee that there will be a correlation between price
movements in the hedging vehicle and in a Fund's portfolio
securities being hedged. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as
variations in speculative market demand for futures and futures
options on securities, including technical influences in futures
trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying
the standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or a futures
option position, and the Fund would remain obligated to meet
margin requirements until the position is closed. In addition,
there can be no assurance that an active secondary market will
continue to exist.
Currency futures contracts and options thereon may be traded
on foreign exchanges. Such transactions may not be regulated as
effectively as similar transactions in the United States; may not
involve a clearing mechanism and related guarantees; and are
subject to the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such position
also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
STOCK INDEX FUTURES CONTRACTS
A Fund may enter into stock (or "securities") index futures
contracts as an efficient means of regulating the Fund's exposure
to the equity markets. A Fund will not engage in transactions in
futures contracts for speculation but only as a hedge against
changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which it intends to
purchase.
An index futures contract is a contract to buy or sell units
of an index at a specified future date at a price agreed upon
when the contract is made. Entering into a contract to buy units
of an index is commonly referred to as purchasing a contract or
holding a long position in the index. Entering into a contract
to sell units of an index is commonly referred to as selling a
contract or holding a short position. The value of a unit is the
current value of the stock index. For example, the S&P 500 Index
is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange (the "Exchange"). The S&P
500 Index assigns relative weightings to the 500 common stocks
included in the Index, and the Index fluctuates with changes in
the market values of the shares of those common stocks. In the
case of the S&P 500 Index, contracts are to buy or sell 500
units. Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The index
futures contract specifies that no delivery of the actual
securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the
expiration of the contract. For example, if a Fund enters into a
futures contract to buy 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, a Fund will gain $2,000
(500 units x gain of $4). If a Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A Fund's success in
using hedging techniques depends, among other things, on IMI's
ability to predict correctly the direction and volatility of
price movements in the futures and options markets as well as in
the securities markets and to select the proper type, time and
duration of hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
A Fund's ability to hedge effectively all or a portion of
its securities through transactions in index futures (and
therefore the extent of its gain or loss on such transactions)
depends on the degree to which price movements in the underlying
index correlate with price movements in the Fund's securities.
Insofar as such securities do not duplicate the components of an
index, the correlation probably will not be perfect.
Consequently, a Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount as the
hedging instrument. This risk will increase as the composition
of a Fund's portfolio diverges from the composition of the
hedging instrument.
Although a Fund intends to establish positions in these
instruments only when there appears to be an active market, there
is no assurance that a liquid market will exist at a time when
the Fund seeks to close a particular option or futures position.
Trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers. In addition, the futures exchanges may suspend trading
after the price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, a Fund may experience
losses as a result of its inability to close out a position, and
it may have to liquidate other investments to meet its cash
needs.
Although some index futures contracts call for making or
taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a
Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
A Fund will only enter into index futures contracts or
futures options that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. A Fund will use futures
contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of
the CFTC.
When purchasing an index futures contract, a Fund will
maintain with its Custodian in a segregated account (and mark-to-
market on a daily basis) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by a Fund.
When selling an index futures contract, a Fund will maintain
with its Custodian in a segregated account (and mark-to-market on
a daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting a Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if the
difference is maintained in cash or liquid assets with the Fund's
Custodian in a segregated account).
COMBINED TRANSACTIONS
A Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions,
multiple currency transactions (including forward currency
contracts) and multiple interest rate transactions and some
combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single
transaction, as part of a single or combined strategy when, in
the opinion of IMI, it is in the best interests of a Fund to do
so. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although
combined transactions are normally entered into based on IMI's
judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the management
objective.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set forth in the Prospectus
under "Investment Objectives and Policies," and the investment
restrictions set forth below are fundamental policies of the Fund
and may not be changed with respect to that Fund without the
approval of a majority (as defined in the 1940 Act) of the
outstanding voting shares of that Fund. Under these
restrictions, each of Ivy Asia Pacific Fund, Ivy China Region
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Small Companies Fund, Ivy South America Fund , Ivy
Developing Nations Fund and Ivy Pan-Europe Fund may not:
(i)make an investment in securities of companies in any one
industry (except obligations of domestic banks or the U.S.
Government, its agencies, authorities, or instrumentalities) if
such investment would cause investments in such industry to
exceed 25% of the market value of the Fund's total assets at the
time of such investment; or
(ii)issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except to the
extent that shares of the separate classes or series of the Trust
may be deemed to be senior securities; provided that collateral
arrangements with respect to currency-related contracts, futures
contracts, options or other permitted investments, including
deposits of initial and variation margin, are not considered to
be the issuance of senior securities for purposes of this
restriction.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Small Companies Fund, Ivy
Developing Nations Fund and Ivy Pan-Europe Fund may not:
(i)purchase securities of any one issuer (except U.S. Government
securities) if as a result more than 5% of the Fund's total
assets would be invested in such issuer or the Fund would own or
hold more than 10% of the outstanding voting securities of that
issuer; provided, however, that up to 25% of the value of the
Fund's total assets may be invested without regard to these
limitations.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy International Fund II,
Ivy South America Fund and Ivy Developing Nations
Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities
except for its own capital stock.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
South America Fund and Ivy Developing Nations Fund may
not:
(i) purchase securities on margin.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy South America Fund and Ivy
Developing Nations Fund may not:
(i) purchase from or sell to any of its officers or
trustees, or firms of which any of them are members or
which they control, any securities (other than capital
stock of the Fund), but such persons or firms may act
as brokers for the Fund for customary commissions to
the extent permitted by the Investment Company Act of
1940.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Canada Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy International Fund II, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but Ivy Asia Pacific Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund may make margin
deposits in connection with transactions in options,
futures and options on futures; or
(ii) Make loans, except this restriction shall not prohibit
(a) the purchase and holding of a portion of an issue
of publicly distributed debt securities, (b) the entry
into repurchase agreements with banks or broker-
dealers, or, with respect to Ivy Asia Pacific Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund, (c) the lending
of the Fund's portfolio securities in accordance with
applicable guidelines established by the Securities and
Exchange Commission (the "SEC") and any guidelines
established by the Trust's Trustees.
Further, as a matter of fundamental policy, Ivy Canada Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Make investments in securities for the purpose of
exercising control over or management of the issuer; or
(ii) Act as an underwriter of securities, except to the
extent that, in connection with the sale of securities,
it may be deemed to be an underwriter under applicable
securities laws.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) borrow money, except as a temporary measure for
extraordinary or emergency purposes, and provided that
the Fund maintains asset coverage of 300% for all
borrowings.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe may not:
(i) Invest in real estate, real estate mortgage loans,
commodities or interests in oil, gas and/or mineral
exploration or development programs, although (a) the
Fund may purchase and sell marketable securities of
issuers which are secured by real estate, (b) the Fund
may purchase and sell securities of issuers which
invest or deal in real estate, (c) the Fund may enter
into forward foreign currency contracts as described in
the Fund's prospectus, and (d) the Fund may write or
buy puts, calls, straddles or spreads and may invest in
commodity futures contracts and options on futures
contracts.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy International Fund II, Ivy South
America Fund and Ivy Developing Nations Fund may not:
(i) purchase or sell real estate or commodities and
commodity contracts.
Each of Ivy China Region Fund, Ivy International Fund II,
Ivy South America Fund and Ivy Developing Nations
Fund will continue to interpret fundamental investment
restriction (i) above to prohibit investment in real estate
limited partnership interests; this restriction shall not,
however, prohibit investment in readily marketable securities of
companies that invest in real estate or interests therein,
including real estate investment trusts.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy South America Fund and Ivy
Developing Nations Fund may not:
(i) sell securities short.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, Ivy International
Small Companies Fund, Ivy South America Fund and Ivy
Developing Nations Fund may not:
(i) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreements, (b) the purchase of publicly
distributed bonds, debentures and other securities of a
similar type, or privately placed municipal or
corporate bonds, debentures and other securities of a
type customarily purchased by institutional investors
or publicly traded in the securities markets, or (c)
the lending of portfolio securities (provided that the
loan is secured continuously by collateral consisting
of U.S. Government securities or cash or cash
equivalents maintained on a daily marked-to-market
basis in an amount at least equal to the market value
of the securities loaned).
Further, as a matter of fundamental policy, each of Ivy South
America Fund and Ivy Developing Nations Fund may not:
(i) borrow money, except for temporary or emergency
purposes; provided that the Fund maintains asset
coverage of 300% for all borrowings.
Further, as a matter of fundamental policy, Ivy China Region Fund
may not:
(i) borrow money, except for temporary purposes where
investment transactions might advantageously require
it. Any such loan may not be for a period in excess of
60 days, and the aggregate amount of all outstanding
loans may not at any time exceed 10% of the value of
the total assets of the Fund at the time any such loan
is made.
Further, as a matter of fundamental policy, Ivy Canada Fund and
Ivy Global Fund may not:
(i) Participate on a joint or a joint and several basis in
any trading account in securities. The "bunching" of
orders of the Fund and of other accounts under the
investment management of the Manager (in the case of
Ivy Global Fund) or the investment adviser, Mackenzie
Financial Corporation (the "Investment Adviser") (in
the case of Ivy Canada Fund) for the sale or purchase
of portfolio securities shall not be considered
participation in a joint securities trading account;
(ii) Borrow amounts in excess of 10% of its total assets,
taken at the lower of cost or market value, and then
only from banks as a temporary measure for
extraordinary or emergency purposes. All borrowings
will be repaid before any additional investments are
made;
(iii) Purchase the securities of issuers conducting
their principal business activities in the same
industry if immediately after such purchase the
value of the Fund's investments in such industry
would exceed 25% of the value of the total assets
of the Fund;
(iv) Purchase any security if, as a result, the Fund would
then have more than 5% of its total assets (taken at
current value) invested in securities restricted as to
disposition under the Federal securities laws; or
(v) Issue senior securities, except insofar as the Fund may
be deemed to have issued a senior security in
connection with any repurchase agreement or any
permitted borrowing.
Further, as a matter of fundamental policy, Ivy Canada Fund may
not:
(i) Write or buy puts, calls, straddles or spreads; invest
in real estate, real estate mortgage loans,
commodities, commodity futures contracts or interests
in oil, gas and/or mineral exploration or development
programs, although (a) the Fund may purchase and sell
marketable securities of issuers which are secured by
real estate, (b) the Fund may purchase and sell
securities of issuers which invest or deal in real
estate, and (c) the Fund may enter into forward foreign
currency contracts as described in the Fund's
prospectus.
Further, as a matter of fundamental policy, Ivy Global Fund may
not:
(i) purchase securities of another investment company,
except in connection with a merger, consolidation,
reorganization or acquisition of assets, and except
that the Fund may invest in securities of other
investment companies subject to the restrictions in
Section 12(d)(1) of the Investment Company Act of 1940
(the "1940 Act").
Further, as a matter of fundamental policy, Ivy Global Science &
Technology Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities,
except for its own capital stock, and except to the
extent that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under the Federal securities laws;
(ii) purchase or sell real estate or commodities and
commodity contracts; provided, however, that the Fund
may purchase securities secured by real estate or
interests therein, or securities issued by companies
that invest in real estate or interests therein, and
except that, subject to the policies and restrictions
set forth in the Prospectus and elsewhere in this SAI,
(i) the Fund may enter into futures contracts, and
options thereon, and (ii) the Fund may enter into
forward foreign currency contracts and currency futures
contracts, and options thereon; or
(iii) sell securities short, except for short sales
"against
the box."
Further, as a matter of fundamental policy, Ivy International
Fund II may not:
(i) invest more than 5% of the value of its total assets in
the securities of any one issuer (except obligations of
domestic banks or the U.S. Government, its agencies,
authorities and instrumentalities); or
(ii) purchase the securities of any other open-end
investment company, except as part of a plan of merger
or consolidation.
Under the 1940 Act, a Fund is permitted, subject to each
Fund's investment restrictions, to borrow money only from banks.
The Trust has no current intention of borrowing amounts in excess
of 5% of each of the Fund's assets.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund has adopted the
following additional restrictions, which are not fundamental and
which may be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory policy.
Under these restrictions, each of Ivy Asia Pacific Fund, Ivy
China Region Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Small Companies
Fund, Ivy South America Fund , Ivy Developing Nations
Fund and Ivy Pan-Europe Fund may not:
(i) invest more than 15% of its net assets taken at
market value at the time of investment in "illiquid
securities." Illiquid securities may include
securities subject to legal or contractual restrictions
on resale (including private placements), repurchase
agreements maturing in more than seven days, certain
options traded over the counter that the Fund has
purchased, securities being used to cover certain
options that a fund has written, securities for which
market quotations are not readily available, or other
securities which legally or in IMI's opinion, subject
to the Board's supervision, may be deemed illiquid, but
shall not include any instrument that, due to the
existence of a trading market, to the Fund's compliance
with certain conditions intended to provide liquidity,
or to other factors, is liquid.
Further, as a matter of non-fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy South America
Fund and Ivy Developing Nations Fund may not:
(i) invest in oil, gas or other mineral leases or
exploration or development programs.
Further, as a matter of non-fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Natural Resources
Fund, Ivy International Small Companies Fund, Ivy South
America Fund , Ivy Developing Nations Fund and Ivy Pan-
Europe Fund may not:
(i) purchase securities of other investment companies,
except in connection with a merger, consolidation or
sale of assets, and except that it may purchase shares
of other investment companies subject to such
restrictions as may be imposed by the Investment
Company Act of 1940 and rules thereunder.
Further, as a matter of non-fundamental policy, each of Ivy China
Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy South America Fund and Ivy
Developing Nations Fund may not:
(i) invest in companies for the purpose of exercising
control of management; or
(ii) invest more than 5% of its total assets in warrants,
valued at the lower of cost or market, or more than 2%
of its total assets in warrants, so valued, which are
not listed on either the New York or American Stock
Exchanges.
Further, as a matter of non-fundamental policy, each of Ivy
Canada Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy International Small Companies Fund and Ivy Pan-Europe Fund
may not:
(i) purchase or sell interests in oil, gas or mineral
leases (other than securities of companies that invest
in or sponsor such programs).
Further, as a matter of non-fundamental policy, each of Ivy
Canada Fund, Ivy Global Fund, Ivy International Small Companies
Fund and Ivy Pan-Europe Fund may not:
(i) purchase or sell real estate limited partnership
interests.
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small Companies Fund and
Ivy Pan-Europe Fund may not:
(i) sell securities short, except for short sales "against
the box."
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) participate on a joint or a joint and several basis in
any trading account in securities. The "bunching" of
orders of the Fund and of other accounts under the
investment management of the Fund's investment adviser,
for the sale or purchase of portfolio securities shall
not be considered participation in a joint securities
trading account.
Further, as a matter of non-fundamental policy, Ivy South
America Fund may not:
(i) purchase or retain securities of an issuer if, with
respect to 75% of the Fund's total assets, such
purchase would result in more than 10% of the
outstanding voting securities of such issuer being held
by the Fund.
Whenever an investment objective, policy or restriction set
forth in the Prospectus or this SAI states a maximum percentage
of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the particular Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in the
percentage which results from circumstances not involving any
affirmative action by a Fund, such as a change in market
conditions or a change in the Fund's asset level or other
circumstances beyond the Fund's control, will not be considered a
violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears the cost
of providing to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer to
funds, other than the Funds, whose shares are also distributed by
Ivy Mackenzie Distributors, Inc. ("IMDI"). These funds are: Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy US Emerging
Growth Fund , Ivy High Yield Fund , Ivy Bond Fund and
Ivy Money Market Fund (the other six series of the Trust).
Shareholders should obtain a current prospectus before exercising
any right or privilege that may relate to these funds.
Effective April 18, 1997, Ivy International Fund suspended the
offer of its shares to new investors. Accordingly, Advisor Class
shares of Ivy International Fund are not available for purchase.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund shareholder
to have specified amounts automatically drawn each month from his
or her bank for investment in Fund shares, is available for all
classes of shares, except Class I. The minimum initial and
subsequent investment under this method is $250 per month (except
in the case of a tax qualified retirement plan for which the
minimum initial and subsequent investment is $250 per month). A
shareholder may terminate the Automatic Investment Method at any
time upon delivery to Ivy Mackenzie Services Corp. ("IMSC") of
telephone instructions or written notice. See "Automatic
Investment Method" in the Prospectus. To begin the plan,
complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, Advisor Class
shareholders of each Fund have an exchange privilege with other
Ivy funds (except Ivy International Fund). Before effecting an
exchange, shareholders should obtain and read the currently
effective prospectus for the Ivy fund into which the exchange is
to be made.
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
on the basis of the relative net asset value per Advisor
Class share. The minimum value of Advisor Class shares that may
be exchanged into an Ivy fund in which shares are not already
held is $10,000. No exchange out of a Fund (other than by a
complete exchange of all Fund shares) may be made if it would
reduce the shareholder's interest in the Advisor Class shares of
the Fund to less than $10,000. Exchanges are available only in
states where the exchange can legally be made.
Each exchange will be made on the basis of the relative net
asset values per share of the Ivy funds involved in the exchange
next computed following receipt by IMSC of telephone instructions
by IMSC or a properly executed request. Exchanges, whether
written or telephonic, must be received by IMSC by the close of
regular trading on the Exchange (normally 4:00 p.m., eastern
time) to receive the price computed on the day of receipt.
Exchange requests received after that time will receive the price
next determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Funds will result
in a taxable gain or loss. Generally, this will be a capital
gain or loss (long-term or short-term, depending on the holding
period of the shares) in the amount of the difference between the
net asset value of the shares surrendered and the shareholder's
tax basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into
account in computing taxable gain or loss on an exchange. See
"Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the Ivy funds in accordance with
the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be
at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several Ivy funds, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the Trust may
be used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in an Ivy Fund if
that fund primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant,
whether the individual's contribution to an IRA is fully
deductible, partially deductible or not deductible depends on
(i) adjusted gross income and (ii) whether it is the individual
or the individual's spouse who is an active participant, in the
case of married individuals filing jointly. Contributions may be
made up to the maximum permissible amount even if they are not
deductible. Rollover contributions are not includible in income
for Federal income tax purposes and therefore are not deductible
from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, amounts withdrawn
and used to pay for deductible medical expenses and amounts
withdrawn by certain unemployed individuals not in excess of
amounts paid for certain health insurance premiums, amounts used
to pay certain qualified higher education expenses, and amounts
used within 120 days of the date the distribution is received to
pay for certain first-time homebuyer expenses. Distributions
must begin to be withdrawn not later than April 1 of the calendar
year following the calendar year in which the individual reaches
age 70-1/2. Failure to take certain minimum required distribu-
tions will result in the imposition of a 50% non-deductible
penalty tax. Extremely large distributions in any one year
(other than 1997, 1998 or 1999) from an IRA (or from an IRA and
other retirement plans) may also result in a penalty tax.
ROTH IRAS: Shares of the Trust also may be used as a
funding medium for a Roth Individual Retirement Account ("Roth
IRA"). A Roth IRA is similar in numerous ways to the regular
(traditional) IRA, described above. Some of the primary
differences are as follows.
A single individual earning below $95,000 can contribute up
to $2,000 per year to a Roth IRA. The maximum contribution
amount diminishes and gradually falls to zero for single filers
with adjusted gross incomes ranging from $95,000 to $110,000.
Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA).
The maximum contribution amount for married couples filing
jointly phases out from $150,000 to $160,000. An individual
whose adjusted gross income exceeds the maximum phase-out amount
cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional
IRA and a Roth IRA as long as the total contribution to all IRAs
does not exceed $2,000. Contributions to a Roth IRA are not
deductible. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained
age 70 1/2.
No distributions are required to be taken prior to the death
of the original account holder. If a Roth IRA has been
established for a minimum of five years, distributions can be
taken tax-free after reaching age 59 1/2, for a first-time home
purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical
expenses, the purchase of health insurance for an unemployed
individual and education expenses.
An individual with an income of less than $100,000 (who is
not married filing separately) can roll his or her existing IRA
into a Roth IRA. However, the individual must pay taxes on the
taxable amount in his or her traditional IRA. Individuals who
complete the rollover in 1998 will be allowed to spread the tax
payments over a four-year period. After 1998, all taxes on such
a rollover will have to be paid in the tax year in which the
rollover is made.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more Ivy funds through a
qualified retirement plan, a Custodial Agreement and a Retirement
Plan are available from IMSC. The Retirement Plan may be adopted
as a profit sharing plan or a money purchase pension plan. A
profit sharing plan permits an annual contribution to be made in
an amount determined each year by the self-employed individual
within certain limits prescribed by law. A money purchase
pension plan requires annual contributions at the level specified
in the Custodial Agreement. There is no set-up fee for qualified
plans and the annual maintenance fee is $20.00 per account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan"), by telephone instructions or by delivery to
IMSC of a written election to have his or her shares withdrawn
periodically (minimum distribution amount -- $250), accompanied
by a surrender to IMSC of all share certificates then outstanding
in such shareholder's name, properly endorsed by the shareholder.
To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000 in
his or her account. Additional investments made by investors
participating in a Withdrawal Plan must equal at least $250 each
while the Withdrawal Plan is in effect. A Withdrawal Plan may
not be established if the investor is currently participating in
the Automatic Investment Method. A Withdrawal Plan may involve
the depletion of a shareholder's principal, depending on the
amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares may be purchased in connection with investment
programs established by employee or other groups using systematic
payroll deductions or other systematic payment arrangements. The
Trust does not itself organize, offer or administer any such
programs. However, it may, depending upon the size of the
program, waive the minimum initial and additional investment
requirements for purchases by individuals in conjunction with
programs organized and offered by others. Unless shares of a
Fund are purchased in conjunction with IRAs (see "How to Buy
Shares" in the Prospectus), such group systematic investment
programs are not entitled to special tax benefits under the Code.
The Trust reserves the right to refuse purchases at any time or
suspend the offering of shares in connection with group
systematic investment programs, and to restrict the offering of
shareholder privileges, such as check writing, simplified
redemptions and other optional privileges, as described in the
Prospectus, to shareholders using group systematic investment
programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMSC each currently charge a maintenance
fee of $6.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay such fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI (or MFC with respect to Ivy Canada Fund and Ivy Global
Natural Resources Fund) places orders for the purchase and sale
of each Fund's portfolio securities. All portfolio transactions
are effected at the best price and execution obtainable.
Purchases and sales of debt securities are usually principal
transactions, and, therefore, brokerage commissions are usually
not required to be paid by the particular Fund for such purchases
and sales (although the price paid generally includes undisclosed
compensation to the dealer). The prices paid to underwriters of
newly-issued securities usually include a concession paid by the
issuer to the underwriter, and purchases of after-market
securities from dealers normally reflect the spread between the
bid and asked prices. In connection with OTC transactions, IMI
(or MFC for Ivy Canada Fund and Ivy Global Natural Resources
Fund) attempts to deal directly with the principal market makers,
except in those circumstances where IMI (or MFC for Ivy Canada
Fund and Ivy Global Natural Resources Fund) believes that a
better price and execution are available elsewhere.
Each Fund' investment manager (MFC, for Ivy Canada Fund and
Ivy Global Natural Resources Fund, and IMI for all of the other
Funds) selects broker-dealers to execute transactions and
evaluates the reasonableness of commissions on the basis of
quality, quantity, and the nature of the firms' professional
services. Commissions to be charged and the rendering of
investment services, including statistical, research, and
counseling services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may be
used by the investment manager in servicing all of its accounts.
In addition, not all of these services may be used by the
investment manager in connection with the services it provides to
a particular Fund or the Trust. A Fund's investment manager may
consider sales of shares of a Fund as a factor in the selection
of broker-dealers and may select broker-dealers who provide it
with research services. The investment manager will not,
however, execute brokerage transactions other than at the best
price and execution.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Canada Fund paid brokerage commissions of $79,464,
$102,121 and $130,955, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy China Region Fund paid brokerage commissions of
$70,459, $62,812 and $70,846, respectively.
During the fiscal years ended December 31, 1995, 1996, and
1997 Ivy Global Fund paid brokerage commissions of $96,124,
$90,904 and $123,985, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy South America Fund paid brokerage commissions of
$17,184, $15,756 and $17,213, respectively.
During the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy Developing Nations Fund paid brokerage commissions of and
$15,236, $95,606 and $181,553, respectively.
During the period from July 22, 1996 (commencement of
operations) to December 31, 1996 Ivy Global Science & Technology
Fund paid brokerage commissions of $37,065. During the fiscal
year ended December 31, 1997, Ivy Global Science & Technology
Fund paid brokerage commissions of $99,546.
During the fiscal year ended December 31, 1997, Ivy Asia
Pacific Fund paid brokerage commissions of $18,500.
During the fiscal year ended December 31, 1997, Ivy Global
Natural Resources Fund paid brokerage commissions of $133,788.
During the fiscal year ended December 31, 1997, Ivy
International Small Companies Fund paid brokerage commissions of
$17,540.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, Ivy International Fund II paid
brokerage commissions of $1,080.
During the period from May 13, 1997 (commencement of
operations) to December 31, 1997, Ivy Pan-Europe Fund paid
brokerage commissions of $406,191.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each Fund will
accept securities only to increase its holdings in a portfolio
security or to take a new portfolio position in a security that
IMI (MFC, in the case of Ivy Canada Fund and Ivy Global Natural
Resources Fund) deems to be a desirable investment for the Fund.
While no minimum has been established, it is expected that each
the Fund will not accept securities having an aggregate value of
less than $1 million. The Trust may reject in whole or in part
any or all offers to pay for the Fund shares with securities and
may discontinue accepting securities as payment for the Fund
shares at any time without notice. The Trust will value accepted
securities in the manner and at the same time provided for
valuing portfolio securities of each the Fund, and the Fund
shares will be sold for net asset value determined at the same
time the accepted securities are valued. The Trust will only
accept securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 74 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1998).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 74 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1998); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998);Director of The
Mackenzie Funds Inc. (1994-
1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 77 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1998);Director of The
Mackenzie Funds Inc. (1987-
1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 72
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 51 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1998);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-1998).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 63 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 74 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1998).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 41 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1998); Vice President
of Mackenzie Series Trust
(1994-1998); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Trustee
of Mackenzie Series Trust
(1996-1998).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 53 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1998).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 56 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. Employees of IMI
are permitted to make personal securities transactions, subject
to the requirements and restrictions set forth in IMI's Code of
Ethics. The Code of Ethics is designed to identify and address
certain conflicts of interest between personal investment
activities and the interests of investment advisory clients such
as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment
Company Institute's Advisory Group on Personal Investing,
prohibits certain types of transactions absent prior approval,
applies to portfolio managers, traders, research analysts and
others involved in the investment advisory process, and imposes
time periods during which personal transactions may not be made
in certain securities, and requires the submission of duplicate
broker confirmations and monthly reporting of securities
transactions. Exceptions to these and other provisions of the
Code of Ethics may be granted in particular circumstances after
review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1997)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES[*]
John S. $13,722 N/A N/A $15,000
Anderegg, Jr.
(Trustee)
Paul H. $13,722 N/A N/A $15,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $13,722 N/A N/A $15,000
Channick
(Trustee)
Frank W. $13,722 N/A N/A $15,000
DeFriece, Jr.
(Trustee)
Roy J. $13,722 N/A N/A $15,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $13,722 N/A N/A $15,000
Rosenthal
(Trustee)
Richard N. $13,722 N/A N/A $15,000
Silverman
(Trustee)
J. Brendan $13,722 N/A N/A $15,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] During the year ended December 31, 1997, the fund complex
consisted of the Trust, which had 17 funds at year end, and
Mackenzie Series Trust, an open-end, management investment
company comprised of 4 funds that were reorganized into
series of unaffiliated investment companies on September 5,
1997.
As of April 27, 1998, the Officers and Trustees of the Trust
as a group owned beneficially or of record less than 1% of the
outstanding Class A, Class B, Class C, Class I and Advisor Class
shares of the Funds and of the other seven Ivy funds that are
series of the Trust but that are not described in this SAI,
except that the Officers and Trustees of the Trust as a group
owned 2.838% and 2.348%, respectively, of Ivy Asia Pacific Fund
Class A shares and Ivy Global Natural Resources Fund Class A
shares as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to each Fund (other than Ivy Canada Fund and Ivy Global
Natural Resources Fund) pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). IMI provides
business management services to Ivy Canada Fund and Ivy Global
Natural Resources Fund pursuant to a Business Management
Agreement (the "Management Agreement"). The Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved (i) by the sole
shareholder of Ivy China Region Fund on October 23, 1993, (ii) by
the sole shareholder of each of Ivy South America Fund and
Ivy Developing Nations Fund on October 28, 1994, (iii) by
the sole shareholder of each of Ivy Global Fund and Ivy Canada
Fund on January 27, 1995, (iv) by the sole shareholder of Ivy
Global Science & Technology Fund on July 16, 1996, (v) by the
sole shareholder of each of Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund and Ivy International Small Companies Fund
on December 13, 1996, and (vi) by the sole shareholder of each of
Ivy International Fund II and Ivy Pan-Europe Fund on April 30,
1997. Prior to shareholder approval, the Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved by the Board
(including a majority of the Trustees who are neither "interested
persons," as defined in the 1940 Act, of the Trust nor have any
direct or indirect financial interest in the operation of the
distribution plan or in any related agreement (the "Independent
Trustees")) (i) on August 23, 1993 with respect to Ivy China
Region Fund, (ii) on September 17, 1994 with respect to Ivy
South America Fund and Ivy Developing Nations Fund ,
(iii) on September 29, 1994 with respect to each of Ivy Canada
Fund and Ivy Global Natural Resources Fund, (iv) on June 8, 1996
with respect to Ivy Global Science & Technology Fund, (v) on
December 7, 1996 with respect to each of Ivy Asia Pacific Fund,
Ivy Global Natural Resources Fund and Ivy International Small
Companies Fund, (vi) on February 8, 1997 with respect to Ivy Pan-
Europe Fund, and (vii) on April 29, 1997 with respect to Ivy
International Fund II.
Until January 31, 1995 MIMI served as the manager and
investment adviser to Ivy Global Fund and as manager to Ivy
Canada Fund, which were then series of The Mackenzie Funds Inc.
(the "Company"). On January 31, 1995, MIMI's interest in the
Agreement (in the case of Ivy Global Fund) and in the Management
Agreement (in the case of Ivy Canada Fund) was assigned by MIMI
to IMI, which is a wholly owned subsidiary of MIMI. The
provisions of the Agreement and the Management Agreement remain
unchanged by IMI's succession to MIMI thereunder. MIMI, a
Delaware corporation, has approximately 10% of its outstanding
common stock listed for trading on the TSE. MIMI is a subsidiary
of MFC, 150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario and registered in
Ontario as a mutual fund dealer whose shares are listed for
trading on the TSE. MFC provides investment advisory services to
Ivy Canada Fund and Ivy Global Natural Resources Fund pursuant to
an Investment Advisory Agreement (the "MFC Agreement"). The MFC
Agreement was approved (i) by the sole shareholder of Ivy Canada
Fund on January 27, 1995 and (ii) by the sole shareholder of Ivy
Global Natural Resources Fund on December 13, 1996. Prior to
shareholder approval, the MFC Agreement was approved by the Board
(including a majority of Independent Trustees) (i) on September
29, 1994 with respect to Ivy Canada Fund and (ii) on December 7,
1996 with respect to Ivy Global Natural Resources Fund.
IMI currently acts as manager and investment adviser to the
following additional investment companies registered under the
1940 Act: Ivy Growth Fund, Ivy US Emerging Growth Fund, Ivy
Growth with Income Fund, Ivy Bond Fund, Ivy High Yield Fund and
Ivy Money Market Fund.
The Agreement obligates IMI to make investments for the
accounts of each Fund (except Ivy Canada Fund and Ivy Global
Natural Resources Fund) in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Prospectus, the 1940 Act and the provisions of the Code
relating to regulated investment companies, subject to policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by these Funds and places
orders with brokers or dealers who deal in such securities. The
Advisory Agreement obligates MFC to make investments for the
account of each of Ivy Canada Fund and Ivy Global Natural
Resources Fund, in accordance with its best judgment and within
the investment objectives and restrictions set forth in the
Prospectus with respect to each of Ivy Canada Fund and Ivy Global
Natural Resources Fund, the 1940 Act and the provisions of the
Code, relating to regulated investment companies, subject to
policy decisions adopted by the Board. MFC also determines the
securities to be purchased or sold by each of Ivy Canada Fund and
Ivy Global Natural Resources Fund and places orders with brokers
or dealers who deal in such securities.
Under the Agreement (the Management Agreement with respect
to Ivy Canada Fund and Ivy Global Natural Resources Fund), IMI
also provides certain business management services. IMI is
obligated to (1) coordinate with each Fund's Custodian and
monitor the services it provides to that Fund; (2) coordinate
with and monitor any other third parties furnishing services to
each Fund; (3) provide each Fund with necessary office space,
telephones and other communications facilities as are adequate
for the particular Fund's needs; (4) provide the services of
individuals competent to perform administrative and clerical
functions that are not performed by employees or other agents
engaged by the particular Fund or by IMI acting in some other
capacity pursuant to a separate agreement or arrangements with
the Fund; (5) maintain or supervise the maintenance by third
parties of such books and records of the Trust as may be required
by applicable Federal or state law; (6) authorize and permit
IMI's directors, officers and employees who may be elected or
appointed as trustees or officers of the Trust to serve in such
capacities; and (7) take such other action with respect to the
Trust, after approval by the Trust as may be required by
applicable law, including without limitation the rules and
regulations of the SEC and of state securities commissions and
other regulatory agencies. Pursuant to the Management Agreement,
IMI is also responsible for reviewing the activities of MFC to
insure that each of Ivy Canada Fund and Ivy Global Natural
Resources Fund is operated in compliance with each such Fund's
investment objectives and policies and with the 1940 Act.
Ivy Global Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual
rate of 1.00% of the first $500 million of its average net
assets, reduced to 0.75% on average net assets over $500 million.
Each of the other Funds (except Ivy Canada Fund and Ivy Global
Natural Resources Fund) pays IMI a monthly fee for providing
business management and investment advisory serves at an annual
rate of 1.00% of each of the Fund's average net assets. Ivy
Canada Fund and Ivy Global Natural Resources Fund each pays IMI a
monthly fee for providing business management services at an
annual rate of 0.50% of each such Fund's average net assets.
For advisory services, Ivy Canada Fund and Ivy Global
Natural Resources Fund each pays MFC a monthly fee at an annual
rate of 0.35% and 0.50%, respectively, of the average net assets
of each such Fund. For the fiscal years ended December 31, 1995,
1996 and 1997, Ivy Canada Fund paid MFC fees of $67,229, $65,289
and $53,306, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy China Region Fund paid IMI $200,605, $233,804 and
$277,601 respectively (of which IMI reimbursed $106,085, $65,675
and $18,377, respectively, pursuant to voluntary expense
limitations).
During the fiscal years ended December 31, 1995, 1996 and
1997, IMI received fees of $96,041, $93,270 and $76,152,
respectively, from Ivy Canada Fund (of which IMI reimbursed
$63,466, $0 and $0, respectively, pursuant to required expense
limitations) and $239,963, $301,433 and $383,981, respectively,
from Ivy Global Fund (of which IMI reimbursed $62,242, $0 and $0
pursuant to voluntary expense limitations).
For the fiscal years ended December 31, 1995, 1996 and 1997,
Ivy International Fund paid IMI fees of $3,948,456, $9,157,858
and $22,898,279, respectively.
During the fiscal years ended December 31, 1995, 1996 and
1997, Ivy South America Fund paid IMI fees of $95,380,
$42,550 and $94,278, respectively (of which IMI reimbursed
$93,340, $0 and $0, respectively, pursuant to required expense
limitations and of which IMI reimbursed $2,040, $99,630 and
$68,548, respectively, pursuant to voluntary expense limitations)
and Ivy Developing Nations Fund paid IMI fees of $91,226,
$109,125 and $284,290, respectively (of which IMI reimbursed
$87,348, $0 and $0, respectively, pursuant to required expense
limitations and of which IMI reimbursed $3,878, $67,600 and
$22,860, respectively, pursuant to voluntary expense
limitations).
During the period from July 22, 1996 (commencement of
operations) to December 31, 1996 and during the fiscal year ended
December 31, 1997, Ivy Global Science & Technology Fund paid IMI
fees of $20,965 and $229,616, respectively (of which IMI
reimbursed $14,813 and $0, respectively, pursuant to voluntary
expense limitations).
During the fiscal year ended December 31, 1997, Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund paid IMI fees of $10,473,
$32,056 and $28,799, respectively (of which IMI Reimbursed
$10,473, $25,180 and $28,799, respectively, pursuant to voluntary
expense limitations.) During the period from May 13, 1997
(commencement of operations) to December 31, 1997, Ivy
International Fund II and Ivy Pan-Europe Fund paid IMI fees of
$413,862 and $1,974, respectively (of which IMI reimbursed
$123,177 and $1,974, respectively, pursuant to voluntary expense
limitations).
Under the Agreement (or the Management Agreement and the
Advisory Agreement with respect to Ivy Canada Fund and Ivy Global
Natural Resources Fund), the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits each Fund's (with the exception of
Ivy Canada Fund) total operating expenses (excluding Rule 12b-1
fees, interest, taxes, brokerage commissions, litigation and
indemnification expenses, and extraordinary expenses) to an
annual rate of 1.95% (1.50% in the case of Ivy International Fund
II) of the Fund's average net assets, which may lower that Fund's
expenses and increase its yield. Each Fund's expense limitation
may be terminated or revised at any time, at which time its
expenses may increase and its yield may be reduced.
On September 13, 1997 , the Board (including a majority
of the Independent Trustees) (i) approved the continuance of the
Agreement with respect to Ivy China Region Fund, Ivy Global Fund,
Ivy South America Fund and Ivy Developing Nations
Fund and (ii) approved the continuance of the Management
Agreement for Ivy Canada Fund. The initial term of the Agreement
(or the Management Agreement with respect to Ivy Global Natural
Resources Fund) between IMI and each of Ivy Asia Pacific Fund,
Ivy Global Natural Resources Fund and Ivy International Small
Companies Fund, which commenced on January 1, 1997, will run for
a period of two years from the date of commencement. The initial
term of the Agreement between IMI and each of Ivy International
Fund II and Ivy Pan-Europe Fund, which commenced on May 13, 1997,
will run for a period of two years from the date of commencement.
Each Agreement (or Management Agreement, with respect to Ivy
Canada Fund and Ivy Global Natural Resources Fund) will continue
in effect with respect to each Fund from year to year, or for
more than the initial period, as the case may be, only so long as
the continuance is specifically approved at least annually (i) by
the vote of a majority of the Independent Trustees and (ii)
either (a) by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the particular Fund or
(b) by the vote of a majority of the entire Board. If the
question of continuance of the Agreements (or adoption of any new
agreement) is presented to shareholders, continuance (or
adoption) shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of the
particular Fund. See "Capitalization and Voting Rights."
Each Agreement (or Management Agreement with respect to Ivy
Canada Fund and Ivy Global Natural Resources Fund) may be
terminated with respect to a particular Fund at any time, without
payment of any penalty, by the vote of a majority of the Board,
or by a vote of a majority of the outstanding voting securities
of that Fund, on 60 days' written notice to IMI, or by IMI on 60
days' written notice to the Trust. The Agreement shall terminate
automatically in the event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of the Funds' shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on September 13, 1997. IMDI distributes shares of the
Funds through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the
Funds on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.
Under the Distribution Agreement, each Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses.
Each Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of each Fund. Each Distribution Agreement may be terminated with
respect to a particular Fund at any time, without payment of any
penalty, by IMDI on 60 days' written notice to the particular
Fund or by a Fund by vote of either a majority of the outstanding
voting securities of the Fund or a majority of the Independent
Trustees on 60 days' written notice to IMDI. Each Distribution
Agreement shall terminate automatically in the event of its
assignment.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid by a Fund. IMDI also may make
payments to unaffiliated broker-dealers for services rendered in
the distribution of each Fund's shares. To qualify for such
payments, shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or broker if
at the end of each year the amount of shares held does not exceed
a minimum amount. The minimum holding period and minimum level
of holdings will be determined from time to time by IMDI.
If a Distribution Agreement is terminated (or not renewed)
with respect to any of the Ivy funds (or class of shares
thereof), each may continue in effect with respect to any other
fund (or Class of shares thereof) as to which it has not been
terminated (or have been renewed).
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of each Fund. At a
meeting held on February 8, 1997, the Board adopted the Rule 18f-
3 plan on behalf of Ivy Pan-Europe Fund. At a meeting held on
April 29, 1997, the Board adopted the Rule 18f-3 plan on behalf
of Ivy International Fund II. At a meeting held on December 5-6,
1997, the Board last approved the Rule 18f-3 plan. The key
features of the Rule 18f-3 plan are as follows: (i) shares of
each class of a Fund represent an equal pro rata interest in that
Fund and generally have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations,
qualifications, terms and conditions, except that each class
bears certain class-specific expenses and has separate voting
rights on certain matters that relate solely to that class or in
which the interests of shareholders of one class differ from the
interests of shareholders of another class; (ii) subject to
certain limitations described in the Prospectus, shares of a
particular class of a Fund may be exchanged for shares of the
same class of another Ivy fund; and (iii) a Fund's Class B shares
will convert automatically into Class A shares of that Fund after
a period of eight years, based on the relative net asset value of
such shares at the time of conversion.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109, maintains custody of the
assets of each Fund held in the United States. Rules adopted
under the 1940 Act permit the Trust to maintain its foreign
securities (Canadian securities, with respect to Ivy Canada Fund
and Ivy Global Natural Resources Fund) and cash in the custody of
certain eligible foreign banks and securities depositories (and
certain eligible Canadian banks and securities depositories, with
respect to Ivy Canada Fund and Ivy Global Natural Resources
Fund). Pursuant to those rules, the Custodian has entered into
subcustodial agreements for the holding of each Fund's foreign
securities (and for the holding of Ivy Canada Fund's and Ivy
Global Natural Resources Fund's non-Canadian foreign securities).
Similarly, pursuant to those rules, Ivy Canada Fund's and Ivy
Global Natural Resources Fund's portfolio securities and cash,
when invested in Canadian securities, will be held by its Sub-
custodian, The Bank of Nova Scotia. With respect to each Fund,
except for Ivy Canada Fund and Ivy Global Natural Resources Fund,
the Custodian may receive, as partial payment for its services, a
portion of the Trust's brokerage business, subject to its ability
to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for the Funds.
As compensation for those services, each Fund pays MIMI a monthly
fee plus out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of a Fund at the preceding month end at
the following rates: $1,250 when net assets are $10 million and
under; $2,500 when net assets are over $10 million to $40
million; $5,000 when net assets are over $40 million to $75
million; and $6,500 when net assets are over $75 million.
For the fiscal years ended December 31, 1995, 1996 and
1997, Ivy Canada Fund paid MIMI $32,399, 33,091 and $35,010,
respectively, under the agreement. During the fiscal years ended
December 31, 1995, 1996 and 1997, Ivy China Region Fund paid MIMI
$32,653, $35,038 and $14,277, respectively, under the agreement.
For the fiscal years ended December 31, 1995, 1996 and 1997, Ivy
Global Fund paid MIMI $32,982, 34,802 and $37,169, respectively,
under the agreement. During the period from July 22, 1996
(commencement of operations) to December 31, 1996 and during the
fiscal year ended December 31, 1997, Ivy Global Science &
Technology Fund paid MIMI $9,171 and $36,454, respectively, under
the agreement. For the fiscal years ended December 31, 1995,
1996 and 1997, Ivy International Fund paid MIMI $91,612, $173,986
and $171,582, respectively, under the agreement. During the
fiscal years ended December 31, 1995, 1996 and 1997, Ivy South
America Fund paid MIMI $15,094, $16,731 and $24,860,
respectively, under the agreement. During the fiscal years ended
December 31, 1995, 1996 and 1997, Ivy Developing Nations Fund
paid MIMI $15,112, $25,951 and $37,378, respectively, under the
agreement. During the fiscal year ended December 31, 1997, Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund paid MIMI $18,400, $18,506,
and $18,633, respectively, under the agreement. For the period
from May 13, 1997 (commencement of operations) to December 31,
1997, Ivy International Fund II and Ivy Pan-Europe Fund paid MIMI
$4,317 and $11,543, respectively, under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service
Agreement, IMSC, a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, each Fund
pays a monthly fee at an annual rate of $20.00 per open Advisor
Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.58 per account that is closed plus certain out-
of-pocket expenses. Certain broker-dealers that maintain
shareholder accounts with a Fund through an omnibus account
provide transfer agent and other shareholder-related services
that would otherwise be provided by IMSC if the individual
accounts that comprise the omnibus account were opened by their
beneficial owners directly. IMSC pays such broker-dealers a per
account fee for each open account within the omnibus account, or
a fixed rate (e.g., .10%) fee, based on the average daily net
asset value of the omnibus account (or a combination
thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI
provides certain administrative services to each Fund. As
compensation for these services, each Fund pays MIMI a monthly
fee at the annual rate of .10% of the average daily net asset
value of its Advisor Class shares.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public
accountants, 200 East Las Olas Boulevard, Suite 1700, Ft.
Lauderdale, Florida 33301, has been selected as auditors for the
Trust. The audit services performed by Coopers & Lybrand L.L.P.,
include audits of the annual financial statements of each of the
funds of the Trust. Other services provided principally relate
to filings with the SEC and the preparation of the funds' tax
returns.
Year 2000 Risks. The services provided to the Funds by IMI,
MFC, Northern Cross, MIMI and the Funds' other service providers
are dependent on those service providers' computer systems. Many
computer software and hardware systems in use today cannot
distinguish between the year 2000 and the year 1900 because of
the way dates are encoded and calculated (the "Year 2000
Problem"). The failure to make this distinction could have a
negative implication on handling securities trades, pricing and
account services. IMI, MFC, Northern Cross, MIMI and the Funds'
other service providers are taking steps that each believes are
reasonably designed to address the Year 2000 Problem with respect
to the computer systems that they use. The Funds believe these
steps will be sufficient to avoid any material adverse impact on
the Funds. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the
Funds.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited
number of shares of beneficial interest (no par value per share).
When issued, shares of each class of each Fund are fully paid,
non-assessable, redeemable and fully transferable. No class of
shares of a Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust permits the
Trustees to create separate series or portfolios and to divide
any series or portfolio into one or more classes. The Trustees
have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for Ivy International Fund and Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class
shares for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy US Emerging Growth Fund (formerly Ivy
Emerging Growth Fund until January 15, 1998), Ivy Global Fund,
Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund II, Ivy High Yield Fund (formerly Ivy
International Bond Fund until January 28, 1998), Ivy South
America Fund (formerly Ivy Latin America Strategy Fund until
January 15, 1998), Ivy Developing Nations Fund (formerly Ivy New
Century Fund until January 15, 1998) and Ivy Pan-Europe Fund, as
well as Class I shares for Ivy Bond Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Fund, Ivy High Yield Fund and Ivy International Small Companies
Fund.
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on matters
that only affect the Fund. All classes of shares of the Fund
will vote together, except with respect to the distribution plan
applicable to the Fund's Class A, Class B or Class C shares or
when a class vote is required by the 1940 Act. On matters
relating to all funds of the Trust, but affecting the funds
differently, separate votes by the shareholders of each fund are
required. Approval of an investment advisory agreement and a
change in fundamental policies would be regarded as matters
requiring separate voting by the shareholders of each fund of the
Trust. If the Trustees determine that a matter does not affect
the interests of a fund, then the shareholders of that fund will
not be entitled to vote on that matter. Matters that affect the
Trust in general, such as ratification of the selection of
independent public accountants, will be voted upon collectively
by the shareholders of all funds of the Trust.
As used in this SAI and the Prospectus, the phrase "majority
vote of the outstanding shares" of a Fund means the vote of the
lesser of: (1) 67% of the shares of that Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of that Fund (or of the
Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by a Fund, the matter shall have
been effectively acted upon with respect to that Fund if a
majority of the outstanding voting securities of that Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 26(c) of the Act were
applicable.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A shares, except that of the outstanding
Class A shares of Ivy Asia Pacific Fund, Donaldson Lufkin
Jenrette Securities Corporation Inc.,
P.O. Box 2052, Jersey City, New Jersey 07303, owned of record
166,675.677 shares (38.07%)
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksosville, Florida 32246, owned of record
58,511.309 shares (13.36%); and except that of the outstanding
Class A shares of Ivy China Region Fund, Resources Trust Co.,
P.O. Box 3865, Englewood Co., 80155-3865, owned of record
465,869.596 shares (22.29%); and except that of the outstanding
Class A shares of Ivy Developing Nations Fund, Fleet
National Bank, P.O. Box 92800, Rochester , New York 14692-8900
owned of record 73,245.436 shares (6.67%) and Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East,3rd Floor,
Jacksonville, Florida 32246, owned of record 60,819.294 shares
(5.54%); and except that of the outstanding Class A shares of Ivy
Global Natural Resources Fund, Carn & Co., P.O. Box 96211
Washington, DC 20090-6211, owned of record 81,267.566 shares
(29.08%), and First Union National Bank, 1525 West WT Harris
Blvd, Charotte, NC 28288-1151, owned of record 22,922.529 shares
(8.20%); and except that of outstanding Class A shares of Ivy
Global Science & Technology Fund , Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, New
Jersey 07303, owned of record 165,274.369 shares (24.09%), and
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive,3rd
Floor, Jacksonville , Florida 32246, owned of record 35,974.163
shares (5.24%); and except that of the outstanding Class A shares
of Ivy International Fund, Charles Schwab & Co., Inc., 101
Montgomery Street, San Francisco, California 94104, owned of
record 15,517,777.019 shares (35.16%), and Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 5,304,142.077 shares
(12.01%); and except that of the outstanding Class A shares of
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive, 3rd Floor, Jacksonville, Florida 32246,
owned of record 805,245.736 shares (33.37%); and except that of
the outstanding Class A shares of Ivy International Small
Companies Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, New Jersey 07303, owned of
record 19,407.118 shares (17.75%), Mackenzie Investment
Management Inc., 700 S. Federal Hwy., Suite 300, Boca Raton, FL
33432, owned of record 10,102.416 shares (9.24%), and Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive, 3rd Floor,
Jacksonville, Florida 32246, owned of record 8,388.029 shares
(7.67%); and except that the outstanding Class A shares of Ivy
Pan-Europe Fund, Mackenzie Investment Management Inc., 700 S.
Federal Hwy., Boca Raton, FL 33432, owned of record 37,553.145
shares (25.51%), Pacific Century Trust, P.O. Box 888, Honolulu,
HI, 96808- 0888, owned of record 41,238.142 shares (28.00%), and
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, Florida 32246, owned of record
18,419.996 shares (12.51); and except that of the outstanding
Class A shares of Ivy South America Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 48,763.532 (12.14%),
and FTC & Co., P.O. Box 173736, Denver, CO 80202 owned of record
25,251.702 (6.29%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class B shares, except that of the outstanding
Class B shares of the Ivy Asia Pacific Fund, Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 94,518.384 shares
(30.97%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, New Jersey 07303, owned of
record 32,529.941 shares (10.66%); and except that of the
outstanding Class B shares of Ivy Canada Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 33,426.107 shares
(12.99%), and JW Charles Clearing Corp, FBO Joseph Zerger IRA,
1550 E. Oakland Park Blvd., Fort Lauderdale, FL 33334, owned of
record 19,465.982 shares (7.56%) and Janet K Nichol,Trustee, 4440
Arch St., San Diego CA 92116 owned of record 13,769.993 shares
(5.35%); and that of the outstanding Class B shares of the Ivy
China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246, owned of
record 152,548.533 shares (14.68%); and that of the outstanding
Class B shares of Ivy Developing Nations Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, Florida 32246, owned of record 411,118.769
shares (32.96%); and that of the outstanding Class B shares of
the Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 84,896.525 shares (10.46%); and that of the
outstanding Class B shares of the Ivy Global Natural Resources
Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida 32246, owned of record
104,611.624 shares (41.64%); and except that of the outstanding
Class B shares of the Ivy International Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 6,666,653.322 shares
(46.54%); and except that of the outstanding Class B shares of
the Ivy International Fund II, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 4,609,455.833 shares (64.15%); and
except that of the outstanding Class B shares of Ivy
International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 27,519.468 shares (23.33%); and
except that of the outstanding Class B shares of Ivy Pan-Europe
Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida 32246, owned of record
22,948.768 shares (36.14%), Pedodontic Asso. Inc.,4211 Haialae
Ave., Suite 405, Honolulu HI 96816-5317, owned of record
10,964.806 shases (17.26%), Community National Bank, P.O. Box
210, 210 Main Street, Seneca, KS 66538, owned of record 5,248.619
shares (8.26%), and Wedbush Morgan Securities, 1000 Wilshire
Blvd., Los Angeles, CA 91506, owned of record 5,080.145 shares
(8.00%); and except that of the outstanding Class B shares of
Ivy South America Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 103,513.751 shares (37.49%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class C shares, except that of the outstanding
Class C shares of Ivy Canada Fund, Francisco Rodriguez Carrreras
& Louis Rodriguez Aguilar JT TEN c/o Zarlene Imports, 1550
Oakland Park Blvd., Fort Lauderdale, FL 33334-4425, owned of
record 22,667.623 shares (36.29%), Francisco Rodriguez Carrreras
& Fuensanta Rosario Rodriguez Aguilar JT TEN c/o Zarlene Imports,
1550 Oakland Park Blvd., Fort Lauderdale, FL 33334-4425, owned of
record 15,118.227 shares (24.20%), JW Charles Clearing Corp, FBO
Giancarlo Dimizio IRA, 4900 N. Ocean Blvd. #1107, Fort
Lauderdale, FL 33308, owned of record 4,980.896 shares (7.97%),
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 4,784.434
shares (7.66%) and Alma R. Buncsak TTEE, 745 Cherokee Path, Lake
Mills, WI 53551, owned of record 3,755.491 shares (6.01%); and
that of the outstanding Class C shares of the Ivy China Region
Fund, The Ohio Company FBO Gerald Mansbach c/o Mansbach Metal,
155 E. Broad Street,.Columbus, OH 43215, owned of record
26,790.606 shares (16.92%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 42,593.930 shares (26.91%); and
that of the outstanding Class C shares of Ivy Developing
Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, Florida 32246, owned of
record 98,801.371 shares (29.38%); and that of the outstanding
Class C shares of Ivy Global Fund, The Ohio Company FBO Gerald
Mansbach c/o Mansbach Metal, 155 E. Broad Street, Columbus, OH
43215, owned of record 21,273.701 shares (29.64%), Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 14,219.372 shares
(19.81%), Linda Powers Kunze TOD John Kunze, 10214 Old Orchard,
Brecksville, OH 44141, owned of record 4,101.874 shares (5.71%),
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 4,074.171
shares (5.67%), and Smith Barney Inc., owned of record 3,694.890
shares (5.14%); and that of the outstanding Class C shares of the
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 5,941.467 shares (41.26%),
Katherine P Ralston & James W Ralston, 609 Hwy. 466, Lady Lake,
FL 32159, owned of record 1,171.068 shares (8.13%), Anthony L
Bassano & Marie E Bassano, 8934 Bari Court, Port Richey, FL
34668, owned of record 1,087.337 shares (7.55%), Donald W Nelson
MD & Joanna R Nelson, 5015 NW 127th Street, Vancouver, WA 98685,
owned of record 1,048.526 shares (7.28%), and Raymond James &
Associates, Inc. CUST for Diversified Dental P/S, 10641 1st
Street E, Suite 204, Treasure Island, FL 33706, owned of record
903.508 shares (6.27%); and except that of the outstanding Class
C shares of Ivy Global Science & Technology Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 33,116.039 shares
(8.54%); and except that of the outstanding Class C shares of the
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246,
owned of record 2,897,728.850 shares (65.96%); and except that
of the outstanding Class C shares of the Ivy International Fund
II, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, Florida 32246, owned of record
2,910,639.915 shares (78.82%); and except that of the outstanding
Class C shares of the Ivy International Small Companies Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, Florida 32246, owned of record
127,274.020 shares (71.36%), and The Ohio Company FBO Gerald
Mansbach c/o Mansbach Metal, 155 East Broad Street, Columbus, OH
45459, owned of record 24,831.652 shares (13.92%); and except
that of the outstanding Class C shares of Ivy Pan-Europe Fund,
Pacific Century Trust, P.O. Box 3170, Honolulu, HI 86802-3170,
owned of record 45,784.705 shares (79.88%), and Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246, owned of record 6,743.781 shares
(11.76%); and except that of the outstanding Class C shares of
Ivy South America Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246, owned of record 30,277.533 shares (73.26%), and
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 2,257.262
shares (5.46%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class I shares, except that of the outstanding
Class I shares of Ivy International Fund, The John E. Fetzer
Institute Inc., 9292 W. KL Avenue, Kalamazoo, MI 49009, owned of
record 621,454.124 shares (21.38%), Lynspen And Company, 420
North 20th Street, Birmingham, AL 35203, owned of record
347,976.439 shares (11.97%), State Street Bank, 200 Newport Ave.,
7th Floor, North Quincy, MA 02171, owned of record 282,832.022
shares (9.73%), Enele Co., 1211 SW 5th Ave., Portland,OR 97204,
owned of record 202,171.320 shares (6.95%), David & Co., P.O.
Box 188, Murfreesboro, TN 37133-0188, owned of record 172,994.958
shares (5.95%), and S. Mark Taper Foundation, 12011 San Vicente
Blvd., Suite 400, Los Angeles, CA 90049, owned of record
156,138.797 shares (5.37%).
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Advisor Class shares, except that of the
outstanding Advisor Class shares of Ivy China Region Fund,
Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, New Jersey 07303, owned of record 1,527.694
shares (99.99%); except that of the outstanding Advisor Class
shares of Ivy International Fund II, Charles Schwab & Co.Inc.,
owned of record 14,512.325 shares (63.83%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City,
New Jersey 07303, owned of record 8,220.177 shares (36.15%); and
except that of the outstanding Advisor Class shares of Ivy
Pan-Europe Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, New Jersey 07303, owned of
record 2,087.343 shares (99.98%).
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of a Fund held personally liable
for the obligations of that Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
NET ASSET VALUE
The net asset value per share of a Fund is computed by
dividing the value of the Fund's aggregate net assets (i.e., its
total assets less its liabilities) by the number of the Fund's
shares outstanding. For purposes of determining a Fund's
aggregate net assets, receivables are valued at their realizable
amounts. A Fund's liabilities, if not identifiable as belonging
to a particular class of the Fund, are allocated among the Fund's
several classes based on their relative net asset size.
Liabilities attributable to a particular class are charged to
that class directly. The total liabilities for a class are then
deducted from the class's proportionate interest in the Fund's
assets, and the resulting amount is divided by the number of
shares of the class outstanding to produce its net asset value
per share.
A security listed or traded on a recognized stock exchange
or The Nasdaq Stock Market Inc. ("Nasdaq") is valued at the
security's last sale price on the exchange on which the security
is principally traded. If no sale is reported at that time, the
average between the current bid and asked price is used. The
value of a foreign security is determined in its national
currency as of the normal close of trading on the foreign
exchange on which it is traded or as of the close of regular
trading on the Exchange, if that is earlier, and that value is
then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined. All other
securities for which OTC market quotations are readily available
are valued at the average between the current bid and asked
price.
Debt securities normally are valued on the basis of quotes
obtained from brokers and dealers (or pricing services that take
into account appropriate valuation factors). Interest is accrued
daily. Money market instruments are valued at amortized cost,
which the Board believes approximates market value. Options are
valued at the last sale price on the exchange on which they
principally are traded, if available, and otherwise are valued at
the last offering price, in the case of written options, and the
last bid price, in the case of purchased options. Exchange
listed and widely-traded OTC futures (and options thereon) are
valued at the most recent settlement price. Securities and other
assets for which market prices are not readily available are
valued at fair value as determined by IMI and approved by the
Board. Trading in securities on European and Far Eastern
securities exchanges is normally completed before the close of
regular trading on the Exchange. Trading on these foreign
exchanges may not take place on all days on which there is
regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of
the national business holidays identified above). If events
materially affecting the value of a Fund's portfolio securities
occur between the time when these foreign exchanges close and the
time when the Fund's net asset value is calculated, such
securities may be valued at fair value as determined by IMI and
approved by the Board.
Portfolio securities are valued (and net asset value per
share is determined) as of the close of regular trading on the
Exchange (normally 4:00 p.m., eastern time) on each day the
Exchange is open for trading. The Exchange and the Trust's
offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On those days when either or both of the
Funds' Custodian or the Exchange close early as a result of a
partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption
requests must be received.
The sale of a Fund's shares will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the Fund's best
interest to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed to have
above average potential for capital appreciation. Common stocks
are disposed of in situations where it is believed that potential
for such appreciation has lessened or that other common stocks
have a greater potential. Therefore, a Fund may purchase and
sell securities without regard to the length of time the security
is to be, or has been, held. A change in securities held by a
Fund is known as "portfolio turnover" and may involve the payment
by that Fund of dealer markup or underwriting commission and
other transaction costs on the sale of securities, as well as on
the reinvestment of the proceeds in other securities. A Fund's
portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the most recently
completed fiscal year by the monthly average of the value of the
portfolio securities owned by the Fund during that year. For
purposes of determining a Fund's portfolio turnover rate, all
securities whose maturities at the time of acquisition were one
year or less are excluded. The annual portfolio turnover rates
for the Funds are provided in the Prospectus under "The Funds'
Financial Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the
value of its net assets, or (iii) for such other periods as the
SEC may by order permit for the protection of shareholders of a
Fund.
Under unusual circumstances, when the Board deems it in
the best interest of a Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part in
securities of that Fund taken at current values. If any such
redemption in kind is to be made, each Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the particular Fund to redeem with cash at a
shareholder's election in any case where the redemption involves
less than $250,000 (or 1% of that Fund's net asset value at the
beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment
be made in securities, the redeeming shareholder may incur
brokerage costs in converting such securities to cash.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment of less than
$10,000 in a Fund for a period of more than 12 months. All
Advisor Class accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $10,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by a Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require
personal identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions, a
Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of certain tax
rules thought to be applicable with respect to the Funds. It is
merely a summary and is not an exhaustive discussion of all
possible situations or of all potentially applicable taxes.
Accordingly, shareholders and prospective shareholders should
consult a competent tax adviser about the tax consequences to
them of investing in the Funds.
Each Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, each Fund
must, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale
or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the particular Fund's assets is
represented by cash, U.S. Government securities, the securities
of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the particular
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, each Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
each Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the particular Fund in October, November or
December of the year with a record date in such a month and paid
by that Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar
year the distributions are declared, rather than the calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or
call option is not included in income at the time of receipt. If
the option expires, the premium is short-term capital gain to the
Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by a Fund is exercised, thereby requiring the
Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will
be long-term or short-term depending upon the holding period of
the security. With respect to a put or call option that is
purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which a Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by a Fund at the
end of each taxable year (and on certain other dates prescribed
in the Code) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by a Fund may result in "straddles" for Federal income
tax purposes. The straddle rules may affect the character of
gains or losses realized by a Fund. In addition, losses realized
by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in
which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the
consequences of such transactions to a Fund are not entirely
clear. The straddle rules may increase the amount of short-term
capital gain realized by a Fund, which is taxed as ordinary
income when distributed to shareholders.
A Fund may make one or more of the elections available under
the Code which are applicable to straddles. If a Fund makes any
of the elections, the amount, character and timing of the
recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain options,
futures and forward contracts, gains or losses attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to
its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross
income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which a Fund held the PFIC shares. A Fund
itself will be subject to tax on the portion, if any, of an
excess distribution that is so allocated to prior Fund taxable
years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, a Fund generally
would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If a Fund invests in certain high yield original issue
discount obligations issued by corporations, a portion of the
original issue discount accruing on the obligation may be
eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company
taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated
by the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by a Fund
may be treated as having acquisition discount, or OID in the case
of certain types of debt securities. Generally, a Fund will be
required to include the acquisition discount, or OID, in income
over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections
applicable to debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition
of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by a Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Fund to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the
revised alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by a Fund as capital gain dividends, are taxable as
long-term capital gains, whether paid in cash or in shares,
regardless of how long the shareholder has held a Fund's shares
and are not eligible for the dividends received deduction.
Shareholders receiving distributions in the form of newly issued
shares will have a cost basis in each share received equal to the
net asset value of a share of a Fund on the distribution date. A
distribution of an amount in excess of a Fund's current and
accumulated earnings and profits will be treated by a shareholder
as a return of capital which is applied against and reduces the
shareholder's basis in his or her shares. To the extent that the
amount of any such distribution exceeds the shareholder's basis
in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares.
Shareholders will be notified annually as to the U.S. Federal tax
status of distributions and shareholders receiving distributions
in the form of newly issued shares will receive a report as to
the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by a Fund, such
distribution generally will be taxable even though it represents
a return of invested capital. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption
sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder
on the sale of Fund shares held by the shareholder for six-months
or less will be treated for tax purposes as a long-term capital
loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
In some cases, shareholders will not be permitted to take
all or portion of their sales loads into account for purposes of
determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st
day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in a Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by
that country.
If more than 50% of the value of a Fund's total assets at
the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and may elect to "pass-
through" to that Fund's shareholders the amount of foreign income
and similar taxes paid by that Fund. Pursuant to this election,
a shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her pro
rata share of the foreign income and similar taxes paid by a
Fund, and will be entitled either to deduct his or her pro rata
share of foreign income and similar taxes in computing his or her
taxable income or to use it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be notified
within 60 days after the close of a Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that
year and, if so, such notification will designate (1) the
shareholder's portion of the foreign taxes paid to each such
country and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if a
Fund makes the election described in the preceding paragraph, the
source of that Fund's income flows through to its shareholders.
With respect to a Fund, gains from the sale of securities
generally will be treated as derived from U.S. sources and
section 988 gains will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, including
foreign source passive income received from a Fund. In addition,
the foreign tax credit may offset only 90% of the revised
alternative minimum tax imposed on corporations and individuals.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
of the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross
proceeds from the redemption of the particular Fund's shares,
except in the case of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the
case of non-exempt shareholders if (1) the shareholder fails to
furnish a Fund with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the
IRS notifies the shareholder or the particular Fund that the
shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to
certify that he or she is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions
or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to a Fund or shareholders. Shareholders
are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund.
PERFORMANCE INFORMATION
Comparisons of a Fund's performance may be made with respect
to various unmanaged indices (including the TSE 300, S&P 100, S&P
500, Dow Jones Industrial Average and Major Market Index) which
assume reinvestment of dividends, but do not reflect deductions
for administrative and management costs. A Fund also may be
compared to Lipper's Analytical Reports, reports produced by a
widely used independent research firm that ranks mutual funds by
overall performance, investment objectives and assets, or to
Wiesenberger Reports. Lipper Analytical Services does not
include sales charges in computing performance. Further
information on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time, include the
average annual total return and the cumulative total return of
shares of a Fund in advertisements, promotional literature or
reports to shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized
average annual total return ("Standardized Return") for a
specific Class of shares of a Fund will be expressed in terms of
the average annual compounded rate of return that would cause a
hypothetical investment in that Class of a Fund made on the first
day of a designated period to equal the ending redeemable value
("ERV") of such hypothetical investment on the last day of the
designated period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to
purchase shares of a specific Class
T = the average annual total return of shares of
that Class
n = the number of years
ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period.
For purposes of the above computation for a Fund, it is
assumed that all dividends and capital gains distributions made
by a Fund are reinvested at net asset value in additional Advisor
Class shares during the designated period. Standardized Return
quotations for the Funds do not take into account any required
payments for federal or state income taxes. Standardized Return
quotations are determined to the nearest 1/100 of 1%.
A Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective
investors total return data that are not calculated according to
the formula set forth above ("Non-Standardized Return").
CUMULATIVE TOTAL RETURN. Cumulative total return is the
cumulative rate of return on a hypothetical initial investment of
$1,000 in a specific Class of shares of a Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of a Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
the Fund shares. Cumulative total return is calculated by
computing the cumulative rates of return of a hypothetical
investment in a specific Class of shares of a Fund over such
periods, according to the following formula (cumulative total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000
to purchase shares of a specific Class
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for a Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of that Fund. These
factors and possible differences in the methods used in
calculating performance quotations should be considered when
comparing performance information regarding a Fund's shares with
information published for other investment companies and other
investment vehicles. Performance quotations should also be
considered relative to changes in the value of a Fund's shares
and the risks associated with a Fund's investment objectives and
policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can
be no assurance that any historical performance quotation will
continue in the future.
The Funds may also cite endorsements or use for comparison
their performance rankings and listings reported in such
newspapers or business or consumer publications as, among others:
AAII Journal, Barron's, Boston Business Journal, Boston Globe,
Boston Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31,
1997, Statement of Assets and Liabilities as of December 31,
1997, Statement of Operations for the fiscal year ended December
31, 1997 (for the period from May 13, 1997 (commencement of
operations) to December 31, 1997 for Ivy International Fund II
and Ivy Pan-Europe Fund), Statement of Changes in Net Assets for
the fiscal years ended December 31, 1997 and December 31, 1996
(for the period from May 13, 1997 (commencement of operations) to
December 31, 1997 for Ivy International Fund II and Ivy Pan-
Europe Fund), Financial Highlights, Notes to Financial
Statements, and Report of Independent Accountants, which are
included in each Fund's December 31, 1997 Annual Report to
shareholders, are incorporated by reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
AND COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue. Issuers rated Prime-2 are deemed to have a strong ability
for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND CHINA REGION COUNTRIES
The information set forth in this Appendix has been
extracted from various government and private publications.
Neither Ivy China Region Fund, Ivy Asia Pacific Fund nor the
Trust's Board of Trustees make any representation as to the
accuracy of such information, nor have the Funds or the Trust's
Board of Trustees attempted to verify it.
The China Region, one of the fastest growing areas of the
world, is diverse, dynamic and evolving. In terms of population,
this region is almost seven times the size of the United States.
Countries in this region are at various stages of economic
development. Hong Kong and Singapore are at a more advanced stage
of economic growth while countries such as Indonesia and China
are at the early stages of economic development. GDP per capita
data presented below illustrates this point. The following table
shows the GDP, population and per capita GDP of the China Region
countries and, for comparison purposes, the United States.
1996
GDP ($US POPULATION PER CAPITA
BILLIONS) (MILLIONS) GDP ($US)
--------- --------- ---------
Hong Kong 161.1 6.2 25,984
Korea 512.3 44.9 11,410
Singapore 91.2 3.0 30,400
Taiwan 259.2 21.2 12,226
Thailand 161.7 60.2 2,686
Malaysia 94.8 19.7 4,812
Indonesia 230.4 193.8 1,189
Philippines 83.5 68.4 1,221
China 700.7 1,294.4 541
China Region 2,294.9 1,711.8 1,341
USA 7,576.1 263.0 28,806
Source: International Marketing Data and Statistics, 22nd Ed.
(Euromonitor 1998); World Economic Factbook, 1997-98.
Total GDP for the China Region was about $2.3 billion in
1996, approximately one third of the GDP of the United States.
Year over year growth in GDP for the China Region is significant,
averaging 13.82% for the five-year period 1992-1996 compared with
only 5.77% for the United States for the same period. The
following tables show the annual change in GDP and inflation, as
measured by the Consumer Price Indexes (CPI), in 1992-1996 and
the average for the five-year period 1992-1996.
CHANGE IN GROSS DOMESTIC PRODUCT
AVERAGE
1992 1993 1994 1995 1996 1992-96
----- ----- ----- ----- ------ -------
Hong Kong 16.58% 15.17% 13.55% 9.33% 11.85% 13.30%
Korea 11.43% 11.13% 14.17% 15.18% 17.31% 13.84%
Singapore 7.12% 14.52% 14.04% 9.63% 6.63% 10.39%
Taiwan 10.95% 10.06% 3.14% 3.91% 13.03% 8.22%
Thailand 12.47% 11.89% 13.60% 15.21% -1.20% 10.39%
Malaysia 14.07% 10.32% 13.68% 13.83% 13.09% 13.00%
Indonesia 14.26% 26.89% 14.99% 1.01% 38.08% 19.05%
Philippines 8.30% 9.13% 14.84% 12.48% 14.94% 11.94%
China 18.97% 30.64% 39.58% 28.29% 3.68% 24.23%
United States 5.19% 5.37% 6.23% 5.07% 7.01% 5.77%
Source: International Marketing Data and Statistics, 22nd Ed.
(Euromonitor 1998).
CHANGE IN CONSUMER PRICE INDEXES
AVERAGE
1992 1993 1994 1995 1996 1992-96
---- ---- ---- ---- ---- -------
Hong Kong 9.3% 8.6% 8.1% 8.7% 6.0% 8.1%
Korea 6.4% 5.2% 5.7% 4.7% 4.8% 5.4%
Singapore 2.3% 2.4% 3.0% 1.7% 1.6% 2.2%
Taiwan 4.5% 2.9% 4.5% 3.7% 3.1% 3.7%
Thailand 3.8% 3.6% 5.3% 5.0% 5.4% 4.6%
Malaysia 4.8% 3.7% 3.5% 6.0% 3.0% 4.2%
Indonesia 8.3% 9.3% 8.5% 9.3% 6.6% 8.4%
Philippines 8.4% 7.8% 9.4% 7.9% 8.8% 8.5%
China 5.8% 14.5% 24.6% 16.6% 8.3% 14.0%
United States 3.0% 3.0% 2.6% 2.8% 2.9% 2.86%
Sources: Emerging Stock Markets Factbook, 1997; OECD Economic
Outlook, December 1997, Vol. 62.; World Bank (David Cislikowski
and John Kim).
As the economics of the countries that comprise the China
Region have experienced different levels of growth, so too have
their stock markets. The following tables show the
capitalization of the stock markets and the changes in stock
prices as measured by local stock indexes.
STOCK MARKET CAPITALIZATION ($US MILLIONS)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
China 18,255 40,567 43,521 42,055 113,755
Hong Kong 170,793 381,459 267,331 301,065 449,381
Korea 107,448 139,420 191,778 181,955 138,817
Singapore 61,180 147,810 177,670 203,230 150,215
Taiwan 101,124 195,198 247,325 187,206 273,608
Thailand 58,259 130,510 131,479 141,507 99,828
Malaysia 94,004 220,328 199,276 222,729 307,179
Indonesia 12,038 32,953 47,241 66,585 91,016
Philippines 13,794 40,327 55,519 58,859 80,649
Sources: Emerging Stock Markets Factbook, 1997; World Bank (Kyuee
Pahk).
ANNUAL PERCENTAGE CHANGES IN LOCAL
STOCK MARKET INDEXES
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
China -12.87% 6.84% -22.30% -14.30% 65.17%
Hong Kong -28.3% -115.7% 31.1% -23.0% *
Korea 11.05% 27.67% 18.61% -14.06% -26.24%
Singapore -2.4% 59.2% -15.1% 4.09% *
Taiwan -26.60% 79.76% 17.36% -27.38% 34.02%
Thailand 25.59% 88.36% -19.18% - 5.83% -35.07%
Malaysia 15.77% 98.04% -23.85% 2.47% 24.40%
Indonesia 10.89% 114.61% -20.23% 9.41% 24.05%
Philippines 9.06% 154.42% -12.84% -6.88% 22.22%
* Not available.
Source: Emerging Stock Markets Factbook, 1997.
Equity valuations in the China Region, as measured by
price/earnings ratios, also vary from country to country
according to economic growth forecasts, corporate earnings growth
forecasts, the outlook for inflation, exchange rates and overall
investor sentiment.
PRICE/EARNINGS RATIOS
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Hong Kong 13.1 21.6 10.7 11.4 16.7
Korea 21.4 25.1 34.5 19.8 11.7
Singapore 19.15 24.7 30.4 23.3 23.1
Taiwan 16.6 34.7 36.8 21.4 28.2
Thailand 13.9 27.5 21.2 21.7 13.1
Malaysia 21.8 43.5 29.0 25.1 27.1
Indonesia 12.2 28.9 20.2 19.8 21.6
Philippines 14.1 38.8 30.8 19.0 20.0
Sources: Emerging Stock Markets Factbook, 1997; World Stock
Exchange Factbook, 1997.
The following table shows changes in the currency exchange
rates of each China Region country relative to the U.S. dollar
for the years ended December 31, 1992-1996.
CURRENCY MOVEMENTS VERSUS US DOLLAR (% CHANGE)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Hong Kong 0.39% 0.06% 0.13% 0.13% -0.1%
Korea -3.77% -2.44% 2.49% 1.64% -8.25%
Singapore -0.88% 2.24% 9.16% 3.18% -0.7%
Taiwan 1.31% -4.51% 0.27% -3.66% -0.77%
Thailand -1.73% 0.04% 1.47% -0.34% -1.76%
Malaysia 4.03% -2.90% 5.46% 0.57% 0.53%
Indonesia -3.85% -1.88% -4.32% -3.87% -3.22%
Philippines 2.15% -5.19% 10.66% -6.98% -0.27%
China (Official)-5.84% -0.84% -45.6% 1.53% -0.5%
Sources: Emerging Stock Markets Factbook, 1997; World Bank (David
Cislikowski).
IVY MONEY MARKET FUND
a series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
__________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy South America Fund) is
diversified. This Statement of Additional Information ("SAI")
relates to Ivy Money Market Fund (the "Fund"). The other
seventeen portfolios of the Trust are described in separate SAIs.
This SAI is not a prospectus, and should be read in
conjunction with the Prospectus for the Fund dated April 30, 1998
(the "Prospectus"), which may be obtained upon request and
without charge from the Trust at the Distributor's address and
telephone number printed below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . 1
U.S. GOVERNMENT SECURITIES. . . . . . . . . . . . . . . . 1
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 1
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 2
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 2
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 4
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 5
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 5
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 5
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 6
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 6
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 8
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 8
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 9
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . 9
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 9
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 9
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 10
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 12
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 16
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 19
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 19
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 20
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 21
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 21
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 21
TRANSFER AND DIVIDEND PAYING AGENT. . . . . . . . . . . . 21
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 22
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 22
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 22
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 23
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 24
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
GENERAL. . . . . . . . . . . . . . . . . . . . . . . 25
DEBT SECURITIES ACQUIRED AT A DISCOUNT . . . . . . . 26
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 26
DISPOSITION OF SHARES. . . . . . . . . . . . . . . . 27
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . 27
OTHER INFORMATION. . . . . . . . . . . . . . . . . . 28
CALCULATION OF YIELD . . . . . . . . . . . . . . . . . . . . . 28
STANDARDIZED YIELD QUOTATIONS. . . . . . . . . . . . 28
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 29
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . . . . . . . . . . . 30
INVESTMENT OBJECTIVE AND POLICIES
The Trust is a diversified open-end management investment
company organized as a Massachusetts business trust on December
21, 1983. The Fund's investment objective and general investment
policies are described in the Prospectus. Additional information
concerning the Fund's investments is set forth below.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayments tends to
increase, thereby shortening the actual average life of the
security. Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the actual average life
of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates and may involve significantly greater
price and yield volatility than traditional debt securities.
Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association, and Student Loan Marketing
Association.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory
notes issued in bearer form by bank holding companies,
corporations and finance companies. The Fund may invest in
commercial paper that is rated Prime-1 by Moody's or A-1 by S&P
or, if not rated by Moody's or S&P, is issued by companies having
an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA
by S&P.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
The Fund may invest in bank obligations, which may include
certificates of deposit, bankers' acceptances and other short-
term debt obligations. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific
merchandise, that are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the
instrument on maturity.
The Fund may invest in certificates of deposit of large
domestic banks (i.e., banks that at the time of their most recent
annual financial statements show total assets in excess of $1
billion), including foreign branches of such domestic banks, and
of smaller banks as described below. The Fund will not invest in
certificates of deposit of foreign banks. Investment in
certificates of deposit issued by foreign branches of domestic
banks involves investment risks that are different in some
respects from those associated with investment in certificates of
deposit issued by domestic banks, including the possible
imposition of withholding taxes on interest income, the possible
adoption of foreign governmental restrictions which might
adversely affect the payment of principal and interest on such
certificates of deposit, or other adverse political or economic
developments. In addition, it might be more difficult to obtain
and enforce a judgment against a foreign branch of a domestic
bank. Although the Trust recognizes that the size of a bank is
important, this fact alone is not necessarily indicative of its
creditworthiness. The Fund may invest in certificates of deposit
issued by banks and savings and loan institutions that at the
time of their most recent annual financial statements had total
assets of less than $1 billion, provided that (i) the principal
amounts of such certificates of deposit are insured by an agency
of the U.S. Government, (ii) at no time will the Fund hold more
than $100,000 principal amount of certificates of deposit of any
one such bank, and (iii) at the time of acquisition, no more than
10% of the Fund's assets (taken at current value) are invested in
certificates of deposit of such banks having total assets not in
excess of $1 billion.
INVESTMENT RESTRICTIONS
The Fund's investment objectives as set forth in the
Prospectus under "Investment Objective and Policies," together
with the investment restrictions set forth below, are fundamental
policies of the Fund and may not be changed without the approval
of a majority (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting
shares. Under these restrictions, the Fund may not:
(i) borrow money, except for temporary purposes where
investment transactions might advantageously
require it. Any such loan may not be for a period
in excess of 60 days, and the aggregate amount of
all outstanding loans may not at any time exceed
10% of the value of the total assets of the Fund
at the time any such loan is made;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) lend any funds or other assets, except that this
restriction shall not prohibit (a) the entry into
repurchase agreements or (b) the purchase of
publicly distributed bonds, debentures and other
securities of a similar type, or privately placed
municipal or corporate bonds, debentures and other
securities of a type customarily purchased by
institutional investors or publicly traded in the
securities markets;
(v) participate in an underwriting or selling group in
connection with the public distribution of
securities except for its own capital stock;
(vi) invest more than 5% of the value of its total
assets in the securities of any one issuer (except
obligations of domestic banks or the U.S.
Government, its agencies, authorities and
instrumentalities);
(vii) hold more than 10% of the voting securities of
any one issuer (except obligations of domestic
banks or the U.S. Government, its agencies,
authorities and instrumentalities);
(viii) purchase from or sell to any of its officers or
trustees, or firms of which any of them are
members or which they control, any securities
(other than capital stock of the Fund), but such
persons or firms may act as brokers for the Fund
for customary commissions to the extent permitted
by the 1940 Act;
(ix) purchase or sell real estate or commodities and
commodity contracts;
(x) purchase the securities of any other open-end
investment company, except as part of a plan of
merger or consolidation;
(xi) make an investment in securities of companies in
any one industry (except obligations of domestic
banks or the U.S. Government, its agencies,
authorities, or instrumentalities) if such
investment would cause investments in such
industry to exceed 25% of the market value of the
Fund's total assets at the time of such
investment; or
(xii) issue senior securities, except as appropriate to
evidence indebtedness which it is permitted to
incur, and except to the extent that shares of the
separate classes or series of the Trust may be
deemed to be senior securities.
Under the 1940 Act, the Fund is permitted, subject to the
above investment restrictions, to borrow money only from banks.
The Trust has no current intention of borrowing amounts in excess
of 5% of the Fund's assets. The Fund will continue to interpret
fundamental investment restriction (ix) as prohibiting investment
in real estate limited partnership interests; this restriction
shall not, however, prohibit investment in readily marketable
securities of companies that invest in real estate or interests
therein, including real estate investment trusts.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following additional restrictions,
which are not fundamental and which may be changed without
shareholder approval to the extent permitted by applicable law,
regulation or regulatory policy. Under these restrictions, the
Fund may not:
(i) invest in oil, gas or other mineral leases or
exploration or development programs;
(ii) invest more than 5% of the value of its total
assets in the securities of unseasoned issuers,
including their predecessors, which have been in
operation for less than three years;
(iii) invest more than 5% of the value of its total
assets in the securities of issuers which are not
readily marketable;
(iv) engage in the purchase and sale of puts, calls,
straddles or spreads (except to the extent
described in the Prospectus and in this SAI);
(v) invest in companies for the purpose of exercising
control of management;
(vi) purchase any security which it is restricted from
selling to the public without registration under
the Securities Act of 1933; or
(vii) invest more than 5% of its total assets in
warrants, valued at the lower of cost or market,
or more than 2% of its total assets in warrants,
so valued, which are not listed on either the New
York or American Stock Exchanges.
Whenever an investment objective, policy or restriction set
forth in the Prospectus or this SAI states a maximum percentage
of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in the percentage
which results from circumstances not involving any affirmative
action by the Fund (such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
the Fund's control) will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears the cost
of providing to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds, other than the Fund, whose shares are also distributed
by Ivy Mackenzie Distributors, Inc. ("IMDI"), which funds are not
described in this SAI. These funds are: Ivy Asia Pacific Fund,
Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy US
Emerging Growth Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy
International Fund II, Ivy High Yield Fund, Ivy International
Small Companies Fund, Ivy South America Fund, Ivy Developing
Nations Fund and Ivy Pan-Europe Fund. (Effective April 18, 1997,
Ivy International Fund suspended the offer of its shares to new
investors.) Shareholders should obtain a current prospectus
before exercising any right or privilege that may relate to these
funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for Class A, Class B and Class C shareholders. The
minimum initial and subsequent investment under this method is
$50 per month (except in the case of a tax-qualified retirement
plan for which the minimum initial and subsequent investment is
$25 per month). A shareholder may terminate the Automatic
Investment Method at any time upon delivery to Ivy Mackenzie
Services Corp. ("IMSC") of telephone instructions or written
notice. See "Automatic Investment Method" in the Prospectus. To
begin the plan, complete Sections 6A and 7B of the Account
Application.
EXCHANGE OF SHARES
As described in the Fund's Prospectus, shareholders of the
Fund have an exchange privilege with certain other Ivy funds
(except Ivy International Fund unless they have an existing Ivy
International Fund account). Before effecting an exchange,
shareholders of the Fund should obtain and read the currently
effective prospectus for the Ivy fund into which the exchange is
to be made.
The minimum amount which may be exchanged into an Ivy fund
in which shares are not already held is $1,000. No exchange out
of the Fund (other than by a complete exchange of all Fund
shares) may be made if it would reduce the shareholder's interest
in the Fund to less than $1,000.
Each exchange of Fund shares will be made on the basis of
the relative net asset value per share of each Ivy fund (into
which the exchange is being made) next computed following receipt
by IMSC of telephone instructions by IMSC or a properly executed
request. An exchange from the Fund into any other funds into
which exchanges are permitted may be subject to a sales charge,
unless such sales charge has already been paid. Exchanges,
whether written or telephonic, must be received by IMSC by the
close of regular trading on the New York Stock Exchange, Inc.
(the "Exchange") (normally 4:00 p.m., eastern time) to receive
the price computed on the day of receipt. Exchange requests
received after that time will receive the price next determined
following receipt of the request. The exchange privilege may be
modified or terminated at any time, upon at least 60 days' notice
to the extent required by applicable law. See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the funds of Ivy Funds in
accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent
purchase payments in connection with tax-deferred retirement
plans must be at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per
account
For shareholders whose retirement accounts are diversified
across several funds of Ivy Funds, the annual maintenance fee
will be limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Trust may be
used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in an Ivy fund (if
that fund primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant,
whether the individual's contribution to an IRA is fully
deductible, partially deductible or not deductible depends on
(i) adjusted gross income and (ii) whether it is the individual
or the individual's spouse who is an active participant, in the
case of married individuals filing jointly. Contributions may be
made up to the maximum permissible amount even if they are not
deductible. Rollover contributions are not includible in income
for Federal income tax purposes and, therefore, are not
deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated
beneficiary, if any, or rolled over into another IRA, amounts
withdrawn and used to pay for deductible medical expenses amounts
withdrawn by certain unemployed individuals not in excess of
amounts paid for certain health insurance premiums amounts used
to pay certain qualified higher education expenses, and amounts
used within 120 days of the date the distribution is received to
pay for certain first-time homebuyer expenses. Distributions
must begin to be withdrawn not later than April 1 of the calendar
year following the calendar year in which the individual reaches
age 70-1/2. Failure to take certain minimum required
distributions will result in the imposition of a 50% non-
deductible penalty tax.
ROTH IRAS: Shares of the Trust also may be used as a
funding medium for a Roth Individual Retirement Account ("Roth
IRA"). A Roth IRA is similar in numerous ways to the regular
(traditional) IRA, described above. Some of the primary
differences are as follows.
A single individual earning below $95,000 can contribute up
to $2,000 per year to a Roth IRA. The maximum contribution
amount diminishes and gradually falls to zero for single filers
with adjusted gross incomes ranging from $95,000 to $110,000.
Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA).
The maximum contribution amount for married couples filing
jointly phases out from $150,000 to $160,000. An individual
whose adjusted gross income exceeds the maximum phase-out amount
cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional
IRA and a Roth IRA as long as the total contribution to all IRAs
does not exceed $2,000. Contributions to a Roth IRA are not
deductible. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained
age 70 1/2.
No distributions are required to be taken prior to the death
of the original account holder. If a Roth IRA has been
established for a minimum of five years, distributions can be
taken tax-free after reaching age 59 1/2, for a first-time home
purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical
expenses, the purchase of health insurance for an unemployed
individual and education expenses.
An individual with an income of less than $100,000 (who is
not married filing separately) can roll his or her existing IRA
into a Roth IRA. However, the individual must pay taxes on the
taxable amount in his or her traditional IRA. Individuals who
complete the rollover in 1998 will be allowed to spread the tax
payments over a four-year period. After 1998, all taxes on such
a rollover will have to be paid in the tax year in which the
rollover is made.
QUALIFIED PLANS. For those self-employed individuals who
wish to purchase shares of one or more of the funds of Ivy Fund
through a qualified retirement plan, a Custodial Agreement and a
Retirement Plan are available from IMSC. The Retirement Plan may
be adopted as a profit sharing plan or a money purchase pension
plan. A profit sharing plan permits an annual contribution to be
made in an amount determined each year by the self-employed
individual within certain limits prescribed by law. A money
purchase pension plan requires annual contributions at the level
specified in the Custodial Agreement. There is no set-up fee for
qualified plans and the annual maintenance fee is $20.00 per
account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59 1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"). Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan") by telephone instructions to IMSC or by
delivery to IMSC of a written election to have his or her shares
withdrawn periodically, accompanied by a surrender to IMSC of all
share certificates then outstanding in such shareholder's name
of, properly endorsed by the shareholder. To be eligible to
elect a Withdrawal Plan, a shareholder must have at least $5,000
in his or her account. A Withdrawal Plan may not be established
if the investor is currently participating in the Automatic
Investment Method. A Withdrawal Plan may involve the depletion
of a shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
Additional investments made by investors participating in
the Withdrawal Plan must equal at least $1,000 each while the
Withdrawal Plan is in effect.
An investor may terminate his or her participation in the
Withdrawal Plan at any time, by delivering written notice to
IMSC. If all shares held by the investor are liquidated at any
time, participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares may be purchased in connection with investment
programs established by employee or other groups using systematic
payroll deductions or other systematic payment arrangements. The
Trust does not itself organize, offer or administer any such
programs. However, it may, depending upon the size of the
program, waive the minimum initial and additional investment
requirements for purchases by individuals in conjunction with
programs organized and offered by others. Unless shares of the
Fund are purchased in conjunction with IRAs (see "How to Buy
Shares" in the Prospectus), such group systematic investment
programs are not entitled to special tax benefits under the Code.
The Trust reserves the right to refuse purchases at any time or
suspend the offering of shares in connection with group
systematic investment programs, and to restrict the offering of
shareholder privileges, such as check writing, simplified
redemptions and and other optional privileges, as described in
the Prospectus, to shareholders using group systematic investment
programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) for each twelve-month period
(or portion thereof) that the account is maintained. The Trust
may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay such fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI places orders for the purchase and sale of the Fund's
portfolio securities. All portfolio transactions are effected at
the best price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions and therefore,
brokerage commissions are usually not required to be paid by the
Fund for such purchases and sales (although the price paid
generally includes undisclosed compensation to the dealer). The
prices paid to underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI attempts to deal directly
with the principal market makers, except in those circumstances
where IMI believes that a better price and execution are
available elsewhere.
IMI selects broker-dealers to execute transactions and
evaluates the reasonableness of commissions on the basis of
quality, quantity, and the nature of the firms' professional
services. Commissions to be charged and the rendering of
investment services, including statistical, research, and
counseling services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may be
used by IMI in servicing all of its accounts. In addition, not
all of these services may be used by IMI in connection with the
services it provides to a particular Fund or the Trust. IMI may
consider sales of shares of Ivy funds as a factor in the
selection of broker-dealers and may select broker-dealers who
provide it with research services. IMI will not, however,
execute brokerage transactions other than at the best price and
execution.
The Fund may, under some circumstances, accept securities in
lieu of cash as payment for Fund shares. The Fund will accept
securities only to increase its holdings in a portfolio security
or to take a new portfolio position in a security that IMI deems
to be a desirable investment for the Fund. While no minimum has
been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1 million.
The Trust may reject in whole or in part any or all offers to pay
for Fund shares with securities and may discontinue accepting
securities as payment for Fund shares at any time without notice.
The Trust will value accepted securities in the manner and at the
same time provided for valuing portfolio securities of the Fund,
and Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will
only accept securities delivered in proper form and will not
accept securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
During the fiscal years ended December 31, 1995, 1996 and
1997, the Fund paid no brokerage commissions.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 74 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1998).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 74 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1998); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998);Director of The
Mackenzie Funds Inc. (1994-
1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 77 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1998);Director of The
Mackenzie Funds Inc. (1987-
1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 72
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 51 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1998);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-1998).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 63 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 74 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1998).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 41 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1998); Vice President
of Mackenzie Series Trust
(1994-1998); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994); Trustee
of Mackenzie Series Trust
(1996-1998).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 53 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1998).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 56 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal securities
transactions, subject to the requirements and restrictions set
forth in IMI's Code of Ethics. The Code of Ethics is designed to
identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards recommended by
the Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, applies to portfolio managers, traders, research
analysts and others involved in the investment advisory process,
and imposes time periods during which personal transactions may
not be made in certain securities, and requires the submission of
duplicate broker confirmations and monthly reporting of
securities transactions. Exceptions to these and other
provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1997)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES[*]
John S. $13,722 N/A N/A $15,000
Anderegg, Jr.
(Trustee)
Paul H. $13,722 N/A N/A $15,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $13,722 N/A N/A $15,000
Channick
(Trustee)
Frank W. $13,722 N/A N/A $15,000
DeFriece, Jr.
(Trustee)
Roy J. $13,722 N/A N/A $15,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $13,722 N/A N/A $15,000
Rosenthal
(Trustee)
Richard N. $13,722 N/A N/A $15,000
Silverman
(Trustee)
J. Brendan $13,722 N/A N/A $15,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] During the year ended December 31, 1997, the fund complex
consisted of the Trust, which had 17 funds at year end, and
Mackenzie Series Trust, an open-end, management investment
company comprised of 4 funds that were reorganized into
series of unaffiliated investment companies on September 5,
1997.
As of April 27, 1998, the Officers and Trustees of the Trust
as a group owned beneficially or of record less than 1% of the
outstanding Class A, Class B, and Class C shares of the Fund and
of the other seventeen Ivy funds that are series of the Trust but
that are not described in this SAI, except that the Officers and
Trustees of the Trust as a group owned 2.838% and 2.348%,
respectively, of Ivy Asia Pacific Fund Class A shares and Ivy
Global Natural Resources Fund Class A shares as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
Ivy Management, Inc. provides business management and
investment advisory services to the Fund pursuant to a Business
Management and Investment Advisory Agreement with the Trust (the
"Agreement"), which was approved by the shareholders of the Fund
on December 30, 1991. Prior to approval by shareholders, the
Agreement was approved on October 28, 1991 by the Board,
including a majority of the Trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the
distribution plan (see "Distribution Services") or in any related
agreement (the "Independent Trustees"). IMI also acts as manager
and investment adviser to the following investment companies
registered under the 1940 Act: Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy US Emerging
Growth Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Fund, Ivy International Fund
II, Ivy International Small Companies Fund, Ivy High Yield Fund,
Ivy South America Fund, Ivy Developing Nations Fund and Ivy Pan-
Europe Fund. IMI is a wholly owned subsidiary of MIMI. MIMI, a
Delaware corporation, has approximately 10% of its outstanding
common stock listed for trading on the Toronto Stock Exchange
("TSE"). MIMI is a subsidiary of Mackenzie Financial Corporation
("MFC"), 150 Bloor Street West, Toronto, Ontario, Canada, a
public corporation organized under the laws of Ontario and
registered in Ontario as a mutual fund dealer whose shares are
listed for trading on the TSE. MFC provides investment advisory
services to certain of the Ivy funds.
The Agreement obligates IMI to make investments for the
account of the Fund in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Fund's current Prospectus, the 1940 Act and the provisions of
the Code relating to regulated investment companies, subject to
policy decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by the Fund and places orders
with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain business
management services. IMI is obligated to (1) coordinate with the
Fund's Custodian and monitor the services it provides to the
Fund; (2) coordinate with and monitor any other third parties
furnishing services to the Fund; (3) provide the Fund with the
necessary office space, telephones and other communications
facilities as are adequate for the Fund's needs; (4) provide the
services of individuals competent to perform administrative and
clerical functions which are not performed by employees or other
agents engaged by the Fund or by IMI acting in some other
capacity pursuant to a separate agreement or arrangement with the
Fund; (5) maintain or supervise the maintenance by third parties
of such books and records of the Trust as may be required by
applicable Federal or state law; (6) authorize and permit IMI's
directors, officers and employees who may be elected or appointed
as trustees or officers of the Trust to serve in such capacities;
and (7) take such other action with respect to the Trust, after
approval by the Trust, as may be required by applicable law,
including without limitation the rules and regulations of the
Securities and Exchange Commission (the "SEC") and of state
securities commissions and other regulatory agencies.
For business management and investment advisory services,
the Fund pays IMI a monthly fee based on the Fund's average daily
net assets during the preceding month at an annual rate of 0.40%.
For the fiscal years ended December 31, 1997, 1996 and 1995, the
Fund paid IMI $83,294, $80,302 and $110,748, respectively (of
which IMI reimbursed $83,294, $199,546 and $148,768,
respectively, pursuant to the voluntary expense limitation
described below).
Under the Agreement, the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits the Fund's total operating expenses
(excluding interest, taxes, brokerage commissions, litigation,
indemnification expenses, and extraordinary expenses) to an
annual rate of 0.85% of the Fund's average net assets, which may
lower the Fund's expenses and increase its yield. The Fund's
expense limitation may be terminated or revised at any time, at
which time its expenses may increase and its yield may be
reduced.
On September 13, 1997, the Board, including a majority of
the Independent Trustees, last approved the continuance of the
Agreement. The Agreement will continue in effect with respect to
the Fund from year to year, or for more than the initial period,
as the case may be, only so long as the continuance is
specifically approved at least annually (i) by the vote of a
majority of the Independent Trustees and (ii) either (a) by the
vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund or (b) by the vote of a
majority of the entire Board. If the question of continuance of
the Agreement (or adoption of any new agreement) is presented to
shareholders, continuance (or adoption) shall be effected only if
approved by the affirmative vote of a majority of the outstanding
voting securities of the Fund. See "Capitalization and Voting
Rights."
The Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by the vote of a
majority of the Board, or by a vote of a majority of the
outstanding voting securities of the Fund, on 60 days' written
notice to IMI, or by IMI on 60 days' written notice to the Trust.
The Agreement shall terminate automatically in the event of its
assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of Ivy Fund's shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on September 13, 1997. IMDI distributes Fund shares
through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the
Fund on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.Pursuant to the
Distribution Agreement, the Fund bears, among other expenses, the
expenses of registering and qualifying its shares for sale under
federal and state securities laws and preparing and distributing
to existing shareholders periodic reports, proxy materials and
Prospectuses. Shares of the Fund are sold at the Fund's net
asset value per share without a sales load.
The Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of the Fund. The Distribution Agreement may be terminated with
respect to the Fund at any time, without payment of any penalty,
by IMDI on 60 days' written notice to the Fund or by the Fund by
the vote of either a majority of the outstanding voting
securities of the Fund or a majority of the Independent Trustees
on 60 days' written notice to IMDI. The Distribution Agreement
shall terminate automatically in the event of its assignment.
If the Distribution Agreement is terminated (or not renewed)
with respect to one or more funds of the Trust, it may continue
in effect with respect to any fund as to which it has not been
terminated (or has been renewed).
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board of the Trust
adopted a multi-class plan on behalf of the Fund and authorized
the redesignation of the Fund's shares into Class A and Class B,
respectively. On February 29, 1996, the Trustees resolved by
written consent to establish a new class of shares, designated as
"Class C," for all Ivy Fund portfolios. The purpose of the Class
B redesignation (and the Class C designation) of shares for the
Fund is primarily to enable the transfer agent for the Ivy funds
to track the contingent deferred sales charge period that applies
to Class B and Class C shares of Ivy funds (other than the Fund)
that are being exchanged for shares of the Fund. In all other
relevant respects, the Fund's Class A, Class B and Class C shares
are identical (i.e., having the same arrangement for shareholder
services and the distribution of securities).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109, maintains custody of the
assets of the Fund. Rules adopted under the 1940 Act permit the
Trust to maintain its foreign securities and cash in the custody
of certain eligible foreign banks and securities depositories.
Pursuant to those rules, the Custodian has entered into
subcustodial agreements for the holding of the Fund's foreign
securities. The Custodian may receive, as partial payment for
its services to the Fund, a portion of the Trust's brokerage
business, subject to its ability to provide best price and
execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement that became
effective March 1, 1992, MIMI provides certain accounting and
pricing services for the Fund, including bookkeeping and
computation of daily net asset value. As compensation for those
services, the Fund pays MIMI a monthly fee of 0.10% of the Fund's
average net assets, plus out-of-pocket expenses as incurred. For
the fiscal years ended December 31, 1995, 1996 and 1997, the Fund
paid MIMI $30,957, $27,774 and $10,624, respectively, for such
services.
TRANSFER AND DIVIDEND PAYING AGENT
IMSC, a wholly owned subsidiary of MIMI, acts as the Fund's
transfer agent pursuant to a Transfer Agency and Shareholder
Services Agreement. For transfer agency and shareholder
services, the Fund pays IMSC an annual fee of $22.00 per open
account and $4.58 for each account that is closed. The Fund also
reimburses IMSC monthly for out-of-pocket expenses. For the
fiscal year ended December 31, 1997, such fees and expenses for
the Fund totalled $86,746. Certain broker-dealers that maintain
shareholder accounts with the Fund through an omnibus account
provide transfer agent and other shareholder-related services
that would otherwise be provided by IMSC if the individual
accounts that comprise the omnibus account were opened by their
beneficial owners directly. IMSC pays such broker-dealers a per
account fee for each open account within the omnibus account, or
a fixed rate (e.g., .10%) fee, based on the average daily net
asset value of the omnibus account (or a combination
thereof).
ADMINISTRATOR
MIMI provides certain administrative services to the Fund
pursuant to an Administrative Services Agreement, in exchange for
a monthly fee at the annual rate of .10% of the Fund's average
daily net assets. For the fiscal years ended December 31, 1997,
1995 and 1995, the Fund paid MIMI $20,823, $20,075 and $27,687,
respectively, for such services.
AUDITORS
Coopers & Lybrand L.L.P., independent certified public
accountants,has been selected as auditors for the Trust. The
audit services performed by Coopers & Lybrand L.L.P. include
audits of the annual financial statements of each of the funds of
the Trust. Other services provided principally relate to filings
with the SEC and the preparation of the funds' tax returns.
Year 2000 Risks. The services provided to the Fund by IMI,
MIMI and the Fund's other service providers are dependent on
those service providers' computer systems. Many computer
software and hardware systems in use today cannot distinguish
between the year 2000 and the year 1900 because of the way dates
are encoded and calculated (the "Year 2000 Problem"). The
failure to make this distinction could have a negative
implication on handling securities trades, pricing and account
services. IMI, MIMI and the Fund's other service providers are
taking steps that each believes are reasonably designed to
address the Year 2000 Problem with respect to the computer
systems that they use. The Fund believes these steps will be
sufficient to avoid any material adverse impact on the Fund. At
this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Fund.
CAPITALIZATION AND VOTING RIGHTS
When issued, shares of each class of the Fund are fully
paid, non-assessable, redeemable and fully transferable. No
class of shares of the Fund has preemptive rights or subscription
rights.
The Amended and Restated Declaration of Trust permits the
Trustees to create separate series or portfolios and to divide
any series or portfolio into one or more classes. The Trustees
have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for the Fund and Ivy International
Fund and Class A, Class B, Class C and Advisor Class shares for
Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy US Emerging Growth Fund (formerly Ivy Emerging
Growth Fund until January 15, 1998), Ivy Global Fund, Ivy Global
Natural Resources Fund, Ivy Global Science & Technology Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy International Fund
II, Ivy High Yield Fund (formerly Ivy International Bond Fund
until January 28, 1998), Ivy South America Fund (formerly Ivy
Latin America Strategy Fund until January 15, 1998), Ivy
Developing Nations Fund (formerly Ivy New Century Fund until
January 15, 1998) and Ivy Pan-Europe Fund, as well as Class I
shares for Ivy Bond Fund, Ivy Global Science & Technology Fund,
Ivy International Fund II, Ivy International Fund, Ivy High Yield
Fund and Ivy International Small Companies Fund.
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of the Fund are entitled to vote alone on matters
that only affect the Fund. All classes of shares of the Fund
will vote together, except when a class vote is required by the
1940 Act. On matters relating to all funds of the Trust, but
affecting the funds differently, separate votes by the
shareholders of each fund are required. Approval of an
investment advisory agreement and a change in fundamental
policies would be regarded as matters requiring separate voting
by the shareholders of each fund of the Trust. If the Trustees
determine that a matter does not affect the interests of a fund,
then the shareholders of that fund will not be entitled to vote
on that matter. Matters that affect the Trust in general, such
as ratification of the selection of independent public
accountants, will be voted upon collectively by the shareholders
of all funds of the Trust.
As used in this SAI and the Fund's Prospectus, the phrase
"majority vote of the outstanding shares" of the Fund means the
vote of the lesser of: (1) 67% of the shares of the Fund (or of
the Trust) present at a meeting if the holders of more than 50%
of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of the Fund (or of
the Trust). With respect to the submission to shareholder vote
of a matter requiring separate voting by the Fund, the matter
shall have been effectively acted upon with respect to the Fund
if a majority of the outstanding voting securities of the Fund
votes for the approval of the matter, notwithstanding that:
(1) the matter has not been approved by a majority of the
outstanding voting securities of any other fund of the Trust; or
(2) the matter has not been approved by a majority of the
outstanding voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 26(c) of the Act were
applicable.
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of the Fund held personally liable
for the obligations of the Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of April 17, 1998, no
shareholder owned beneficially or of record 5% or more of the
Fund's outstanding Class A, Class B or Class C shares, except
that of the outstanding Class A shares of the Fund, Trust Co. Of
America, P.O. Box 6503, Englewood, CO 80155-6503 owned of record
3,751,224.750 shares (18.53%); and except that of the outstanding
Class C shares of the Fund, Pacific Century Trust, P.O. Box 3170,
Honolulu, HI 96802-3170, owned of record 76,617.180 shares
(32.23%), Smith Barney Inc., 388 Greenwich Street, New York, NY
10013, owned of record 35,734.800 shares (15.03%), Hawaiian Trust
Co., P.O. Box 3170, Honolulu, HI 96802-3170, owned of record
29,044.420 shares (12.21%), Mcdonald & CO., 2210 Brockman Blvd.,
Ann Arbor MI 48104, owned of record 21,137.460 shares (8.89%),
and Dain Rauscher Inc., P.O. Box 025323, Maimi, FL 33102, owned
of record 19,309.770 shares (8.12%).
NET ASSET VALUE
The share price, or value, for the separate classes of
shares of the Fund is called the net asset value per share. The
Fund's net asset value per share is computed by dividing the
value of the assets of the Fund, less its liabilities, by the
total number of shares of the Fund outstanding. For purposes of
determining the aggregate net assets of the Fund, receivables are
valued at their realizable amounts. Pursuant to SEC rules, the
Fund's portfolio securities are valued using the amortized cost
method of valuation in an effort to maintain a constant net asset
value of $1.00 per share, which the Trustees has determined to be
in the best interest of the Fund and its shareholders. The
amortized cost method involves valuing a security at cost on the
date of acquisition and thereafter assuming a constant rate of
accretion of discount or amortization of premium. While this
method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the
instrument. During such periods, the yield to an investor in the
Fund may differ somewhat from that obtained in a similar
investment company which uses available market quotations to
value all of its portfolio securities.
Portfolio securities are valued and net asset value per
share of the Fund is determined as of the close of regular
trading on the Exchange (normally 4:00 p.m., eastern time) every
Monday through Friday (exclusive of national business holidays).
The Trust's offices will be closed, and net asset value will not
be calculated, on the following national business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On those days when either or both of the
Fund's Custodian or the Exchange close early as a result of such
day being a partial holiday or otherwise, the Trust reserves the
right to advance the time on that day by which purchase and
redemption requests must be received.
The sale of shares of the Fund will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the best interest of
the Fund to do so.
REDEMPTIONS
Shares of the Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC. The Fund does not assess a contingent deferred
sales charge. However, if shares of another Ivy fund that are
subject to a contingent deferred sales charge are exchanged for
shares of the Fund, the contingent deferred sales charge will
carry over to the investment in the Fund and may be assessed upon
redemption.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly determine
the value of its net assets, or (iii) for such other periods as
the SEC may by order permit for the protection of shareholders of
the Fund.
Under unusual circumstances, when the Board deems it in the
best interest of the Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part,
in securities of the Fund taken at current values. If any such
redemption in kind is to be made, the Fund may make an election
pursuant to Rule 18f-1 under the 1940 Act. This will require the
Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of the
Fund's net asset value at the beginning of each 90-day period
during which such redemptions are in effect, if that amount is
less than $250,000). Should payment be made in securities, the
redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have
maintained an investment of less than $1,000 in the Fund for a
period of more than 12
months. All accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $1,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by the Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
The Fund employs reasonable procedures that require personal
identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions,
the Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of certain tax rules
thought to be applicable with respect to the Fund. It is merely
a summary and is not an exhaustive discussion of all possible
situations or of all potentially applicable taxes. Accordingly,
shareholders and prospective shareholders should consult a
competent tax adviser about the tax consequences to them of
investing in the Fund.
GENERAL. The Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly,
the Fund must, among other things, (a) derive in each taxable
year at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans, and gains from
the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business
of investing in such stock, securities or currencies; and (b)
diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's
assets is represented by cash, U.S. Government securities, the
securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, the Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. The Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
the Fund must distribute during each calendar year (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the Fund in October, November or December of the
year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions
are declared, rather than the calendar year in which the
distributions are received.
DEBT SECURITIES ACQUIRED AT A DISCOUNT. Some of the debt
securities (with a fixed maturity date of more than one year from
the date of issuance) that may be acquired by the Fund may be
treated as debt securities that are issued originally at a
discount. Generally, the amount of the original issue discount
("OID") is treated as interest income and is included in income
over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt
security matures.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. The Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by the
Fund may be treated as having acquisition discount, or OID in the
case of certain types of debt securities. Generally, the Fund
will be required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the
debt security matures. The Fund may make one or more of the
elections applicable to debt securities having acquisition
discount, or OID, which could affect the character and timing of
recognition of income.
The Fund generally will be required to distribute dividends
to shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by the Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by the Fund.
DISTRIBUTIONS. Distributions of investment company taxable
income are taxable to a U.S. shareholder as ordinary income,
whether paid in cash or shares. Dividends paid by the Fund to a
corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by the
Fund, may qualify for the dividends received deduction. However,
the revised alternative minimum tax applicable to corporations
may reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by the Fund as capital gain dividends, are taxable to
individual shareholders at a maximum 20% to 28% capital gains
rate (depending on the Fund's holding period for the assets
giving rise to the gain), whether paid in cash or in shares, and
regardless of how long the shareholder has held the Fund's
shares; such distributions are not eligible for the dividends
received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share
received equal to the net asset value of a share of the Fund on
the distribution date. A distribution of
an amount in excess of the Fund's current and accumulated
earnings and profits will be treated by a shareholder as a return
of capital which is applied against and reduces the shareholder's
basis in his or her shares. To the extent that the amount of any
such distribution exceeds the shareholder's basis in his or her
shares, the excess will be treated by the shareholder as gain
from a sale or exchange of the shares. Shareholders will be
notified annually as to the U.S. Federal tax status of
distributions and shareholders receiving distributions in the
form of newly issued shares will receive a report as to the net
asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by the Fund,
such distribution generally will be taxable even though it
represents a return of invested capital. Shareholders should be
careful to consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at this
time may reflect the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES. Upon a redemption, sale or exchange
of his or her shares, a shareholder generally will realize a
taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands
and, if so, may be eligible for reduced federal tax rates,
depending upon the shareholder's holding period for the shares.
Any loss realized on a redemption, sale or exchange will be
disallowed to the extent the shares disposed of are replaced
(including through reinvestment of dividends) within a period of
61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any
loss realized by a shareholder on the sale of Fund shares held by
the shareholder for six months or less will be treated for tax
purposes as a long-term capital loss to the extent of any
distributions of capital gain dividends received or treated as
having been received by the shareholder with respect to such
shares.
In some cases, shareholders will not be permitted to take
all or a portion of their sales loads into account for purposes
of determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of the Fund, (2) the shares are disposed of before the
91st day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in the Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of Fund shares.
BACKUP WITHHOLDING. The Fund will be required to report to
the Internal Revenue Service (the "IRS") all taxable
distributions, as well as gross proceeds from the redemption of
the Fund's shares, except in the case of certain exempt
shareholders. All such distributions and proceeds will be
subject to withholding of Federal income tax at a rate of 31%
("backup withholding") in the case of non-exempt shareholders if
(1) the shareholder fails to furnish the Fund with and to certify
the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the shareholder or
the Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to
backup withholding. If the withholding provisions are
applicable, any such distributions or proceeds, whether
reinvested in additional shares or taken in cash, will be reduced
by the amounts required to be withheld.
OTHER INFORMATION. Distributions may also be subject to
additional state, local and foreign taxes depending on each
shareholder's particular situation. [In many states, Fund
distributions which are derived from interest in certain U.S.
Government obligations are exemt from taxation.] Non-U.S.
shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. This discussion does
not purport to deal with all of the tax consequences applicable
to the Fund or its shareholders. Shareholders are advised to
consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
CALCULATION OF YIELD
The Fund's yield quotations as they may appear in the
Prospectus, this SAI, advertising or sales literature are
calculated by standard methods prescribed by the SEC.
STANDARDIZED YIELD QUOTATIONS. The Fund's current yield
quotation is computed by determining the net change, exclusive of
capital changes (i.e., realized gains and losses from the sale of
securities and unrealized appreciation and depreciation) and
income other than investment income, in the value of a
hypothetical pre-existing account having a balance of one share
at the beginning of the base period, subtracting a hypothetical
charge reflecting expense deductions from the hypothetical
account, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period
return. This base period return is then multiplied by 365/7 with
the resulting yield figure carried to the nearest 100th of 1%.
The determination of net change in account value reflects the
value of additional shares purchased with dividends from the
original share, dividends declared on both the original share and
any such additional shares, and all fees, other than non-
recurring account or sales charges, that are charged to all
shareholder accounts in the Fund in proportion to the length of
the base period. For any account fees that vary with the size of
the account in the Fund, the account fee used for purposes of the
yield computation is assumed to be the fee that would be charged
to the mean account size of the Fund. The distribution rate will
differ from the current yield computation because it may include
distributions to shareholders from sources other than dividends
and interest, short-term capital gains and net equalization
credits.
The Fund's current yield for the seven-day period ended
December 31, 1997 was 4.98%. IMI currently reimburses the Fund
to limit ordinary operating expenses to 0.85% of average net
assets. Without reimbursement, the Fund's current yield for this
period would have been 3.81%.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of the Fund. The
voluntary expense reimbursement by IMI with respect to the Fund
has the effect of increasing yields of the Fund. These factors
and possible differences in the methods used in calculating
yields should be considered when comparing performance
information regarding the Fund to information published for other
investment companies and other investment vehicles. Yields
should also be considered relative to changes in the value of the
Fund's shares and the risk associated with the Fund's investment
objective and policies. At any time in the future, yields may be
higher or lower than past yields and there can be no assurance
that any historical yield quotation will continue in the future.
The Fund may also cite endorsements or use for comparison
its performance rankings and listings reported in such newspapers
or business or consumer publications as, among others: AAII
Journal, Barron's, Boston Business Journal, Boston Globe, Boston
Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The Fund's Portfolio of Investments as of December 31, 1997,
the Statement of Assets and Liabilities as of December 31, 1997,
the Statement of Operations for the fiscal year ended December
31, 1997, the Statement of Changes in Net Assets for the fiscal
years ended December 31, 1996 and 1997,the Financial Highlights,
Notes to Financial Statements, and Report of Independent
Accountants are included in the Fund's December 31, 1997 Annual
Report to Shareholders, which is incorporated by reference into
this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue. Issuers rated Prime-2 are deemed to have a strong ability
for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
PART C. OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: Financial Highlights
Incorporated by reference in Part B:
December 31, 1997 Annual Report to Shareholders of
Ivy Asia Pacific Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Bond Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Canada Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy China Region Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Developing Nations Fund (formerly Ivy New
Century Fund):
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Global Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Global Natural Resources Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Global Science & Technology Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year Ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year Ended December 31, 1997 and the period
from July 22, 1996 (commencement of
operations) to December 31, 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Growth Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Growth with Income Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy International Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy International Fund II:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Period May
13, 1997 (commencement of operations) to
December 31, 1997
- Statement of Changes in Net Assets for the
Period May 13, 1997 to December 31, 1997
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy International Small Companies Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Money Market Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy Pan-Europe Fund:
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Period May
13, 1997 (commencement of operations) to
December 31, 1997
- Statement of Changes in Net Assets for the
Period May 13, 1997 (commencement of
operations) to December 31, 1997
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy South America Fund (formerly Ivy Latin America
Strategy Fund):
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
December 31, 1997 Annual Report to Shareholders of
Ivy US Emerging Growth Fund (formerly Ivy Emerging
Growth Fund):
- Portfolio of Investments at December 31, 1997
- Statement of Assets and Liabilities as of
December 31, 1997
- Statement of Operations for the Year ended
December 31, 1997
- Statement of Changes in Net Assets for the
Year ended December 31, 1997 and 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust
dated December 10, 1992, filed with Post-
Effective Amendment No. 71 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(b) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 73 to Registration Statement No. 2-17613
and incorporated by reference herein.
(c) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 74 to Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Establishment and Designation of Additional
Series (Ivy Emerging Growth Fund), filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Redesignation of Shares (Ivy Growth with
Income Fund--Class A) and Establishment and
Designation of Additional Class (Ivy Growth
with Income Fund--Class C), filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Redesignation of Shares (Ivy Emerging Growth
Fund--Class A, Ivy Growth Fund--Class A and
Ivy International Fund--Class A), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Establishment and Designation of Additional
Series (Ivy China Region Fund), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Establishment and Designation of Additional
Class (Ivy China Region Fund--Class B, Ivy
Emerging Growth Fund--Class B, Ivy Growth
Fund--Class B, Ivy Growth with Income Fund--
Class B and Ivy International Fund--Class B),
filed with Post-Effective Amendment No. 74
for Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Establishment and Designation of Additional
Class (Ivy International Fund--Class I),
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Establishment and Designation of Series and
Classes (Ivy Latin American Strategy Fund--
Class A and Class B, Ivy New Century Fund--
Class A and Class B), filed with Post-
Effective Amendment No. 75 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(k) Establishment and Designation of Series and
Classes (Ivy International Bond Fund--Class A
and Class B), filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(l) Establishment and Designation of Series and
Classes (Ivy Bond Fund, Ivy Canada Fund, Ivy
Global Fund, Ivy Short-Term US Government
Securities Fund (now known as Ivy Short-Term
Bond Fund) -- Class A and Class B), filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Redesignation of Ivy Short-Term U.S.
Government Securities Fund as Ivy Short-Term
Bond Fund, filed with Post-Effective
Amendment No. 81 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Redesignation of Shares (Ivy Money Market
Fund--Class A and Ivy Money Market Fund--
Class B), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(o) Form of Establishment and Designation of
Additional Class (Ivy Bond Fund--Class C; Ivy
Canada Fund--Class C; Ivy China Region Fund--
Class C; Ivy Emerging Growth Fund--Class C;
Ivy Global Fund--Class C; Ivy Growth Fund--
Class C; Ivy Growth with Income Fund--Class
C; Ivy International Fund--Class C; Ivy Latin
America Strategy Fund--Class C; Ivy
International Bond Fund--Class C; Ivy Money
Market Fund--Class C; Ivy New Century Fund--
Class C), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(p) Establishment and Designation of Series and
Classes (Ivy Global Science & Technology
Fund--Class A, Class B, Class C and Class I),
filed with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Establishment and designation of Series and
Classes (Ivy Global Natural Resources Fund--
Class A, Class B and Class C; Ivy Asia
Pacific Fund--Class A, Class B and Class C;
Ivy International Small Companies Fund--Class
A, Class B, Class C and Class I), filed with
Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Establishment and designation of Series and
Classes (Ivy Pan-Europe Fund--Class A, Class
B and Class C), filed with Post-Effective
Amendment No. 92 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Establishment and designation of Series and
Classes (Ivy International Fund II--Class A,
Class B, Class C and Class I), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(t) Form of Establishment and Designation of
Additional Class (Ivy Asia Pacific Fund--
Advisor Class; Ivy Bond Fund--Advisor Class;
Ivy Canada Fund--Advisor Class; Ivy China
Region Fund--Advisor Class; Ivy Emerging
Growth Fund--Advisor Class; Ivy Global Fund--
Advisor Class; Ivy Global Natural Resources
Fund--Advisor Class; Ivy Global Science &
Technology Fund--Advisor Class; Ivy Growth
Fund--Advisor Class; Ivy Growth with Income
Fund--Advisor Class; Ivy International Bond
Fund--Advisor Class; Ivy International Fund
II--Advisor Class; Ivy International Small
Companies Fund--Advisor Class; Ivy Latin
America Strategy Fund--Advisor Class; Ivy New
Century Fund--Advisor Class; Ivy Pan-Europe
Fund--Advisor Class), filed with Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(u) Redesignations of Series and Classes (Ivy
Emerging Growth Fund redesignated as Ivy US
Emerging Growth Fund; Ivy New Century Fund
redesignated as Ivy Developing Nations Fund;
and, Ivy Latin America Strategy Fund
redesignated as Ivy South America Fund),
filed with Post-Effective Amendment No. 97 to
Registration Statement 2-17613 and
incorporated by reference herein.
(v) Redesignation of Series and Classes and
Establishment and Designation of Additional
Class (Ivy International Bond Fund
redesignated as Ivy High Yield Fund; Class I
shares of Ivy High Yield Fund established),
filed with this Post-Effective Amendment No.
98 to Registration Statement 2-17613.
2. By-Laws, as amended, filed with Post-Effective
Amendment No. 48 to Registration Statement No. 2-
17613 and incorporated by reference herein.
3. Not Applicable
4. (a) Specimen Securities for Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy International
Fund and Ivy Money Market Fund, filed with
Post-Effective Amendment No. 49 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Specimen Security for Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
70 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Specimen Security for Ivy China Region Fund,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Specimen Security for Ivy Latin American
Strategy Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(e) Specimen Security for Ivy New Century Fund,
filed with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Specimen Security for Ivy International Bond
Fund, filed with Post-Effective Amendment No.
76 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Specimen Securities for Ivy Bond Fund, Ivy
Canada Fund, Ivy Global Fund, and Ivy Short-
Term U.S. Government Securities Fund, filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
5. (a) Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy
Management, Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund,
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Subadvisory Contract by and among Ivy Fund,
Ivy Management, Inc. and Boston Overseas
Investors, Inc., filed with Post-Effective
Amendment No. 68 to Registration Statement
No. 2-17613 and incorporated by the reference
herein.
(c) Assignment Agreement relating to Subadvisory
Contract, filed with Post-Effective Amendment
No. 74 to Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Business Management and Investment Advisory
Agreement Supplement for Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
74 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Business Management and Investment Advisory
Agreement Supplement for Ivy China Region
Fund, filed with Post-Effective Amendment No.
71 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Business Management and Investment
Advisory Supplement for Ivy Latin America
Strategy Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Business Management and Investment
Advisory Agreement Supplement for Ivy New
Century Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(h) Form of Business Management and Investment
Advisory Agreement Supplement for Ivy
International Bond Fund, filed with Post-
Effective Amendment No. 76 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Business Management and Investment Advisory
Agreement Supplement for Ivy Bond Fund, Ivy
Global Fund and Ivy Short-Term U.S.
Government Securities Fund, filed with Post-
Effective Amendment No. 81 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(j) Master Business Management Agreement between
Ivy Fund and Ivy Management, Inc., filed with
Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Form of Supplement to Master Business
Agreement between Ivy Fund and Ivy
Management, Inc. (Ivy Canada Fund), filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Investment Advisory Agreement between
Ivy Fund and Mackenzie Financial Corporation,
filed with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Global Science & Technology Fund), filed
with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Asia Pacific Fund and Ivy International
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(o) Form of Supplement to Master Business
Management Agreement between Ivy Fund and Ivy
Management, Inc. (Ivy Global Natural
Resources Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(p) Form of Supplement to Investment Advisory
Agreement between Ivy Fund and Mackenzie
Financial Corporation (Ivy Global Natural
Resources Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(q) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Pan-Europe Fund), filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(r) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy International Fund II), filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(s) Addendum to Master Business Management and
Investment Advisory Agreement between Ivy
Fund and Ivy Management, Inc. (Ivy Developing
Nations Fund, Ivy South America Fund, Ivy US
Emerging Growth Fund), filed with Post-
Effective Amendment No. 98 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(t) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy
Fund and Ivy Management, Inc. (Ivy High Yield
Fund), filed with Post-Effective Amendment
No. 98 to Registration Statement No. 2-17613
and incorporated by reference herein.
6. (a) Dealer Agreement, as amended and, filed with
Post-Effective Amendment No. 70 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Amended and Restated Distribution Agreement,
filed with Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Addendum to Amended and Restated Distribution
Agreement, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(d) Addendum to Amended and Restated Distribution
Agreement (Ivy Money Market Fund--Class A and
Class B), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(e) Form of Addendum to Amended and Restated
Distribution Agreement (Class C), filed with
Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Global Science &
Technology Fund--Class A, Class B, Class C
and Class I), filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Global Natural
Resources Fund--Class A, Class B and Class C;
Ivy Asia Pacific Fund--Class A, Class B and
Class C; Ivy International Small Companies
Fund--Class A, Class B, Class C, and Class
I), filed with Post-Effective Amendment No.
89 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Pan-Europe Fund--
Class A, Class B and Class C), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy International
Fund II--Class A, Class B, Class C and Class
I), filed with Post-Effective Amendment No.
94 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Form of Addendum to Amended and Restated
Distribution Agreement (Advisor Class), filed
with Post-Effective Amendment No. 96 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Addendum to Amended and Restated Distribution
Agreement (Ivy Developing Nations Fund, Ivy
South America Fund, Ivy US Emerging Growth
Fund), filed with Post-Effective Amendment
No. 98 to Registration Statement No. 2-17613
and incorporated by reference herein.
(l) Addendum to Amended and Restated Distribution
Agreement (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
7. Not Applicable
8. Custodian Agreement between Ivy Fund and Brown
Brothers Harriman & Co., filed with Post-Effective
Amendment No. 74 to Registration No. 2-17613 and
incorporated by reference herein.
9. (a) Master Administrative Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund,
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Addendum to Administrative Services Agreement
Supplement for Ivy International Fund, filed
with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Administrative Services Agreement Supplement
for Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Administrative Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Administrative Services Agreement Supplement
for Class I Shares of Ivy International Fund,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Master Fund Accounting Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Emerging Growth Fund and Ivy
Money Market Fund, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Fund Accounting Services Agreement Supplement
for Ivy Growth with Income Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Fund Accounting Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Transfer Agency and Shareholder Services
Agreement between Ivy Fund and Ivy
Management, Inc., filed with Post-Effective
Amendment No. 71 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(j) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(k) Assignment Agreement relating to Transfer
Agency and Shareholder Services Agreement,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Administrative Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Administrative Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Fund Accounting Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(o) Form of Fund Accounting Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Administrative Services Agreement
Supplement for Ivy International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Fund Accounting Services Agreement
Supplement for International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(t) Administrative Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Fund Accounting Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(v) Form of Administrative Services Agreement
Supplement (Class C) for Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy
Emerging Growth Fund, Ivy Global Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond
Fund, Ivy Latin America Strategy Fund, Ivy
Money Market Fund and Ivy New Century Fund,
filed with Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(w) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Class C),
filed with Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(x) Form of Administrative Services Agreement
Supplement for Ivy Global Science &
Technology Fund, filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(y) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Science &
Technology Fund, filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(z) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Science & Technology Fund, filed with Post-
Effective Amendment No. 86 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(aa) Form of Administrative Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund, filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(bb) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund, filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(cc) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund
and Ivy International Small Companies Fund,
filed with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(dd) Form of Administrative Services Agreement
Supplement for Ivy Pan-Europe Fund, filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ee) Form of Fund Accounting Services Agreement
Supplement for Ivy Pan-Europe Fund, filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ff) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Pan-
Europe Fund, filed with Post-Effective
Amendment No. 94 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(gg) Form of Administrative Services Agreement
Supplement for Ivy International Fund II,
filed with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(hh) Form of Fund Accounting Services Agreement
Supplement for Ivy International Fund II,
filed with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ii) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy
International Fund II, filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(jj) Form of Administrative Services Agreement
Supplement (Advisor Class) for Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Bond
Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy Latin
America Strategy Fund, Ivy New Century Fund
and Ivy Pan-Europe Fund, filed with Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(kk) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Advisor
Class), filed with Post-Effective Amendment
No. 96 to Registration Statement No. 2-17613
and incorporated by reference herein.
(ll) Addendum to Administrative Services Agreement
(Ivy Developing Nations Fund, Ivy South
America Fund, Ivy US Emerging Growth Fund),
filed with Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(mm) Addendum to Fund Accounting Services
Agreement (Ivy Developing Nations Fund, Ivy
South America Fund, Ivy US Emerging Growth
Fund), filed with Post-Effective Amendment
No. 98 to Registration Statement No. 2-17613
and incorporated by reference herein.
(nn) Addendum to Transfer Agency and Shareholder
Services Agreement (Ivy Developing Nations
Fund, Ivy South America Fund, Ivy US Emerging
Growth Fund, Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(oo) Addendum to Fund Accounting Services
Agreement (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(pp) Addendum to Administrative Services Agreement
(Ivy High Yield Fund), filed with Post-
Effective Amendment No. 98 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(qq) Amended Addendum to Transfer Agency and
Shareholder Services Agreement (Ivy
Developing Nations Fund, Ivy South America
Fund, Ivy US Emerging Growth Fund, Ivy High
Yield Fund), filed with Post-Effective
Amendment No. 98 to Registration Statement
No. 2-17613 and incorporated by reference
herein (a corrected version of which is being
filed with this Post-Effective Amendment No.
99).
10. Opinion of Dechert Price & Rhoads, filed with this
Post-Effective Amendment No. 99.
11. Consent of Coopers & Lybrand L.L.P., filed with
this Post-Effective Amendment No. 99.
12. Reports of Coopers & Lybrand L.L.P., filed with
this Post-Effective Amendment No. 99.
13. Not applicable.
14. Not applicable.
15. (a) Amended and Restated Distribution Plan for
Class A shares of Ivy China Region Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
73 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Distribution Plan for Class B shares of Ivy
China Region Fund, Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy International
Fund and Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Distribution Plan for Class C Shares of Ivy
Growth with Income Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Rule 12b-1 Related Agreement, filed
with Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A
Shares, filed with Post-Effective Amendment
No. 76 to Registration Statement No. 2-17613
and incorporated by reference herein.
(f) Supplement to Distribution Plan for Ivy Fund
Class B Shares, filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A
Shares, filed with Post-Effective Amendment
No. 77 to Registration Statement No. 2-17613
and incorporated by reference herein.
(h) Supplement to Distribution Plan for Ivy Fund
Class B Shares, filed with Post-Effective
Amendment No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(i) Form of Supplement to Distribution Plan for
Ivy Growth with Income Fund Class C Shares
(Redesignation as Class D Shares), filed with
Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Form of Distribution Plan for Class C shares
of Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy Emerging Growth Fund, Ivy
Global Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy
International Bond Fund, Ivy Latin America
Strategy Fund and Ivy New Century Fund, filed
with Post-Effective Amendment No. 85 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Global Science & Technology
Fund), filed with Post-Effective Amendment
No. 87 to Registration Statement No. 2-17613
and incorporated by reference herein.
(l) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(m) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and Ivy International
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(o) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Pan-Europe Fund), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Pan-Europe
Fund), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(s) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Pan-Europe
Fund), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(t) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy International Fund II), filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy International
Fund II), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(v) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy International
Fund II), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(w) Amendment to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares
(Ivy Developing Nations Fund, Ivy South
America Fund, Ivy US Emerging Growth Fund),
filed with Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(x) Amendment to Distribution Plan for Ivy Fund
Class B Shares (Ivy Developing Nations Fund,
Ivy South America Fund, Ivy US Emerging
Growth Fund), filed with Post-Effective
Amendment No. 98 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(y) Amendment to Distribution Plan for Ivy Fund
Class C Shares (Ivy Developing Nations Fund,
Ivy South America Fund, Ivy US Emerging
Growth Fund), filed with Post-Effective
Amendment No. 98 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(z) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares
(Ivy High Yield Fund), filed with Post-
Effective Amendment No. 98 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(aa) Supplement to Distribution Plan for Ivy Fund
Class B Shares (Ivy High Yield Fund), filed
with Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(bb) Supplement to Distribution Plan for Ivy Fund
Class C Shares (Ivy High Yield Fund), filed
with Post-Effective Amendment No. 98 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
16. Schedule of Computation of Standardized
Performance Quotations, filed with Post-Effective
Amendment No. 71 to Registration Statement No. 2-
17613 and incorporated by reference herein.
17. Financial Data Schedules filed with this Post-
Effective Amendment No. 99 to Registration
Statement No. 2-17613.
18. (a) Plan adopted pursuant to Rule 18f-3 under the
Investment Company Act of 1940, filed with
Post-Effective Amendment No. 83 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 85 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(c) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 87 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 92 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(g) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(h) Amended and Restated Plan adopted pursuant to
Rule 18f-3 under the Investment Company Act
of 1940, filed with Post-Effective Amendment
No. 98 to Registration Statement No. 2-17613
and incorporated by reference herein (a
corrected version of which is filed with this
Post-Effective Amendment No. 99).
25. Not applicable
26. Number of Holders of Securities
Fund: Date Class Record Holders
Ivy Asia Pacific 02/28/98 Class A 135
Fund Class B 89
Class C 124
Advisor Class 0
Ivy Bond Fund 02/28/98 Class A 4,776
Class B 758
Class C 110
Class I 0
Advisor Class 7
Ivy Canada Fund 02/28/98 Class A 1,644
Class B 146
Class C 22
Advisor Class 0
Ivy China Region 02/28/98 Class A 2,079
Fund Class B 1,135
Class C 106
Advisor Class 1
Ivy Developing 02/28/98 Class A 869
Nations Fund Class B 808
(formerly Ivy New Class C 224
Century Fund) Advisor Class 0
Ivy Global Fund 02/28/98 Class A 1,388
Class B 806
Class C 370
Advisor Class 0
Ivy Global Natural 02/28/98 Class A 198
Resources Fund Class B 172
Class C 14
Advisor Class 0
Ivy Global Science 02/28/98 Class A 890
& Technology Fund Class B 735
Class C 370
Class I 0
Advisor Class 0
Ivy Growth Fund 02/28/98 Class A 26,904
Class B 309
Class C 17
Advisor Class 0
Ivy Growth with 02/28/98 Class A 6,104
Income Fund Class B 1,391
Class C 134
Class D 0
Advisor Class 0
Ivy High Yield 02/28/98 Class A 0
Fund Class B 0
Class C 0
Class I 0
Advisor Class 0
Ivy International 02/28/98 Class A 27,928
Fund Class B 21,416
Class C 3,631
Class I 400
Advisor Class 0
Ivy International 02/28/98 Class A 1,100
Fund II Class B 1,910
Class C 564
Class I 0
Advisor Class 1
Ivy International 02/28/98 Class A 110
Small Companies Class B 94
Fund Class C 32
Class I 0
Advisor Class 0
Ivy Money Market 02/28/98 Class A 2,276
Fund Class B 203
Class C 21
Ivy Pan-Europe 02/28/98 Class A 35
Fund Class B 25
Class C 3
Advisor Class 0
Ivy South America 02/28/98 Class A 398
Fund (formerly Class B 219
Ivy Latin America Class C 18
Strategy Fund) Advisor Class 0
Ivy US Emerging 02/28/98 Class A 5,393
Growth Fund Class B 3,747
(formerly Ivy Emer- Class C 434
ging Growth Fund) Advisor Class 1
27. Indemnification
A policy of insurance covering Ivy Management, Inc. and the
Registrant will insure the Registrant's trustees and officers and
others against liability arising by reason of an actual or
alleged breach of duty, neglect, error, misstatement, misleading
statement, omission or other negligent act.
Reference is made to Article VIII of the Registrant's Amended and
Restated Declaration of Trust, dated December 10, 1992, filed
with Post-Effective Amendment No. 71 to Registration Statement
No. 2-17613 and incorporated by reference herein.
28. Business and Other Connections of Investment Adviser
Information Regarding Adviser and Subadviser Under Advisory
Arrangements. Reference is made to the Form ADV of each of Ivy
Management, Inc., the adviser to the Trust, Mackenzie Financial
Corporation, the adviser to Ivy Canada Fund, and Northern Cross
Investments Limited (the successor to Boston Overseas Investors,
Inc.), the subadviser to Ivy International Fund.
The list required by this Item 28 of officers and directors of
Ivy Management, Inc. and Northern Cross Investments Limited,
together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated
by reference to Schedules A and D of each firm's respective Form
ADV.
29. Principal Underwriters
(a) Ivy Mackenzie Distribution, Inc. ("IMDI"), formerly
Mackenzie Ivy Funds Distributors, Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite
300, Boca Raton, Florida 33432, Registrant's
distributor, is a subsidiary of Mackenzie
Investment Management Inc. ("MIMI"), Via Mizner
Financial Plaza, 700 South Federal Highway, Suite
300, Boca Raton, Florida 33432. IMDI is the
successor to MIMI's distribution activities.
(b) The information required by this Item 29 regarding each
director, officer or partner of IMDI is incorporated by
reference to Schedule A of Form BD filed by IMDI
pursuant to the Securities Exchange Act of 1934.
(c) Not applicable
30. Location of Accounts and Records
The information required by this item is incorporated by
reference to Item 7 of Part II of Post-Effective Amendment
No. 46 to Registration Statement No. 2-17613.
31. Not applicable
32. Undertakings
(a) Not applicable
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's
latest annual report to shareholders, upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 99 to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 99 to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston,
and the Commonwealth of Massachusetts, on the 30th day of April,
1998.
IVY FUND
By: Keith J. Carlson**
By: JOSEPH R. FLEMING President
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 99 to the Registration
Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
MICHAEL G. LANDRY* Trustee and Chairman 4/30/98
(Chief Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee 4/30/98
PAUL H. BROYHILL* Trustee 4/30/98
STANLEY CHANNICK* Trustee 4/30/98
FRANK W. DEFRIECE, JR.* Trustee 4/30/98
ROY J. GLAUBER* Trustee 4/30/98
KEITH J. CARLSON** Trustee and President 4/30/98
JOSEPH G. ROSENTHAL* Trustee 4/30/98
RICHARD N. SILVERMAN* Trustee 4/30/98
J. BRENDAN SWAN* Trustee 4/30/98
C. WILLIAM FERRIS* Treasurer (Chief 4/30/98
Financial Officer)
By: JOSEPH R. FLEMING
Attorney-in-fact
* Executed pursuant to powers of attorney filed with
Post-Effective Amendments Nos. 69, 73, 74, 84 and 89 to
Registration Statement No. 2-17613.
** Executed pursuant to power of attorney filed with
Post-Effective Amendment No. 89 to Registration Statement
No. 2-17613.
EXHIBIT INDEX
9(qq) Corrected Addendum to Transfer Agency and Shareholder
Services Agreement
10 Opinion of Dechert Price & Rhoads
11 Consent of Coopers & Lybrand L.L.P.
12 Reports of Coopers & Lybrand L.L.P.
17 Financial Data Schedules
18(h) Corrected Amended and Restated Plan adopted pursuant
to
Rule 18f-3 under the Investment Company Act of 1940
EXHIBIT 9(qq)
ADDENDUM TO TRANSFER AGENCY AND
SHAREHOLDER SERVICES AGREEMENT
IVY FUND
The Transfer Agency and Shareholder Services Agreement, made
as of the 1st day of January, 1992 between Ivy Fund and Ivy
Management, Inc. ("IMI"), of which the duties of IMI thereunder
were assigned on October 1, 1993 to Ivy Mackenzie Services Corp.
("IMSC"), is hereby revised as set forth below in this Addendum.
Schedule A of the Agreement is revised in its entirety to read as
follows:
SCHEDULE A
IVY FEES:
The transfer agency and shareholder service fees are based
on an annual per account fee. These fees are payable on a
monthly basis at the rate of 1/12 of the annual fee and are
charged with respect to all open accounts.
A. PER ACCOUNT FEES
Classes Class Advisor
Fund Name A, B, C I Class
Ivy Asia Pacific Fund $20.00 N/A $20.00
Ivy Bond Fund 20.75 10.25 20.75
Ivy Canada Fund 20.00 N/A 20.00
Ivy China Region Fund 20.00 N/A 20.00
Ivy Developing Nations Fund 20.00 N/A 20.00
Ivy Global Fund 20.00 N/A 20.00
Ivy Global Natural Resources Fund 20.00 N/A 20.00
Ivy Global Science & Technology Fund 20.00 10.25 20.00
Ivy Growth Fund 20.00 N/A 20.00
Ivy Growth with Income Fund 20.00 N/A 20.00
Ivy High Yield Fund 20.00 10.25 20.00
Ivy International Fund 20.00 10.25 N/A
Ivy International Small Companies Fund 20.00 10.25 20.00
Ivy International Fund II 20.00 10.25 20.00
Ivy Money Market Fund 22.00 N/A N/A
Ivy Pan-Europe Fund 20.00 N/A 20.00
Ivy South America Fund 20.00 N/A 20.00
Ivy US Emerging Growth Fund 20.00 N/A 20.00
In addition, in accordance with an agreement between IMSC
and First Data Investor Services Group, Inc. (formerly The
Shareholder Services Group, Inc.), each Fund will pay a fee of
$4.58 for each account that is closed, which fee may be increased
from time to time in accordance with the terms of that agreement.
B. SPECIAL SERVICES
Fees for activities of a non-recurring nature, such as
preparation of special reports, portfolio consolidations, or
reorganization, and extraordinary shipments will be subject to
negotiation.
This Addendum shall take effect as of the date that the
Registration Statement pertaining to Ivy High Yield Fund, filed
with the Securities and Exchange Commission on or about January
30, 1998, pursuant to Rule 485(a)(1) under the Securities Act of
1933, first becomes effective.
IN WITNESS WHEREOF, the parties hereto have caused this
Addendum to be executed on this 25th day of March, 1998.
IVY FUND
By: KEITH J. CARLSON, President
IVY MACKENZIE SERVICES CORP.
By: C. WILLIAM FERRIS, President
EXHIBIT 10
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MASSACHUSETTS 02109-4603
April 30, 1998
Ivy Fund
Via Mizner Financial Plaza
700 South Federal Highway
Suite 300
Boca Raton, Florida 33432
Dear Sirs:
As counsel for Ivy Fund (the "Trust"), we are familiar with
the registration of the Trust under the Investment Company Act of
1940, as amended (the "1940 Act")(File No. 811-1028), and the
Prospectuses contained in Post-Effective Amendment No. 99 to the
Trust's registration statement relating to the shares of
beneficial interest of Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy Money Market Fund,
Ivy Pan-Europe Fund, Ivy South America Fund and Ivy US Emerging
Growth Fund (the "Shares") being filed under the Securities Act
of 1933, as amended (File No. 2-17613) ("Post-Effective Amendment
No. 99"). We have also examined such other records of the Trust,
agreements, documents and instruments as we deemed appropriate.
Based upon the foregoing, it is our opinion that the Shares
have been duly authorized and, when issued and sold at the public
offering price contemplated by the Prospectuses for the Funds and
delivered by the Trust against receipt of the net asset value of
the Shares, will be issued as fully paid and nonassessable shares
of the Trust.
We consent to the filing of this opinion on behalf of the
Trust with the Securities and Exchange Commission in connection
with the filing of Post-Effective Amendment No. 99.
Very truly yours,
/s/DECHERT PRICE & RHOADS
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the incorporation by reference and inclusion
in Post-Effective Amendment No. 99 to the Registration Statement
on Form N-1A (File No. 2-17613, hereafter the "Registration
Statement") of Ivy Fund of our reports dated February 13, 1998,
on our audits of the financial statements and financial
highlights of Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy Money Market Fund,
Ivy Pan-Europe Fund, Ivy South America Fund and Ivy US Emerging
Growth Fund appearing in the December 31, 1997 Annual Reports to
Shareholders of the Funds, which annual reports are incorporated
by reference in Post-Effective Amendment No. 99 to the
Registration Statement. We also consent to the reference to our
Firm under the caption "The Funds' Financial Highlights" in the
Prospectuses and "Auditors" in the Fund's Statements of
Additional Information.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
April 30, 1998
EXHIBIT 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy South America Fund, formerly
Ivy Latin America Strategy Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy US Emerging Growth Fund, formerly
Ivy Emerging Growth Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Pan-Europe Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations, statement of changes in net assets, and financial
highlights for the period May 13, 1997 (commencement) to December
31, 1997. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, and the results of its operations, changes in its net
assets, and the financial highlights for the period May 13, 1997
(commencement) to December 31, 1997, in conformity with generally
accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Money Market Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Small Companies Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations, statement of changes in net assets, and financial
highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, and the results of its operations, changes in its net
assets, and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Fund II (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations, statement of changes in net assets, and financial
highlights for the period May 13, 1997 (commencement) to December
31, 1997. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, and the results of its operations, changes in its net
assets, and the financial highlights for the period May 13, 1997
(commencement) to December 31, 1997, in conformity with generally
accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth with Income Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Science & Technology Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statements
of operations for the year then ended, and the statement of
changes in net assets for the year then ended and the period from
July 22, 1996 (commencement) to December 31, 1996 and the
financial highlights for each of the periods indicated. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for the year then ended and the period
July 22, 1996 (commencement) to December 31, 1996 and the
financial highlights for the periods indicated, in conformity
with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Natural Resources Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations, statement of changes in net assets, and financial
highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, and the results of its operations, changes in its net
assets, and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Developing Nations Fund, formerly
Ivy New Century Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy China Region Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Canada Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Bond Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Asia Pacific Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1997, and the related statement
of operations, statement of changes in net assets, and financial
highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31,
1997, and the results of its operations, changes in its net
assets, and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 13, 1998
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 391020
<DISTRIBUTIONS-OTHER> 13058
<NUMBER-OF-SHARES-SOLD> 65628
<NUMBER-OF-SHARES-REDEEMED> 55634
<SHARES-REINVESTED> 22508
<NET-CHANGE-IN-ASSETS> 5986275
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 4570798
<AVERAGE-NET-ASSETS> 328835680
<PER-SHARE-NAV-BEGIN> 17.69
<PER-SHARE-NII> (.14)
<PER-SHARE-GAIN-APPREC> 1.96
<PER-SHARE-DIVIDEND> .07
<PER-SHARE-DISTRIBUTIONS> 1.72
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<PER-SHARE-NAV-END> 17.72
<EXPENSE-RATIO> 2.30
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<PERIOD-END> DEC-31-1997
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<INVESTMENTS-AT-VALUE> 304222913
<RECEIVABLES> 348990
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<OTHER-ITEMS-ASSETS> 20870296
<TOTAL-ASSETS> 325523018
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EXHIBIT 18(h)
IVY FUND
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on February 7, 1998)
I. INTRODUCTION
In accordance with Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"), this Plan describes the
multi-class structure that will apply to certain series of Ivy
Fund (each a "Fund" and, collectively, the "Funds"), including
the separate class arrangements for the service and distribution
of shares, the method for allocating the expenses and income of
each Fund among its classes, and any related exchange privileges
and conversion features that apply to the different classes.
II. THE MULTI-CLASS STRUCTURE
Each of the following Funds is authorized to issue four
classes of shares identified as Class A, Class B, Class C and an
Advisor Class: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy High Yield Fund, Ivy International Fund[FN][Ivy
International Fund does not have an Advisor Class], Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy South America Fund, Ivy Money Market Fund[FN1][The separation
of Ivy Money Market Fund shares into three separate classes has
been authorized as a means of enabling the Funds' transfer agent
to track the contingent deferred sales charge period that applies
to Class B and Class C shares of other Funds that are being
exchanged for shares of Ivy Money Market Fund. In all other
relevant respects, the three classes of Ivy Money Market Fund
shares are identical (i.e., having the same arrangement for
shareholder services and the distribution of securities), and are
not subject to any sales load other than in connection with the
redemption of Class B or Class C shares that have been acquired
pursuant to an exchange from another Fund. (See Section
III.D.)], Ivy Pan-Europe Fund and Ivy US Emerging Growth Fund.
Ivy Bond Fund, Ivy Global Science & Technology Fund, Ivy High
Yield Fund, Ivy International Fund, Ivy International Fund II and
Ivy International Small Companies Fund are also authorized to
issue an additional class of shares identified as Class I.
Shares of each class of a Fund represent an equal pro rata
interest in the underlying assets of that Fund, and generally
have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class shall bear certain class-
specific expenses, as described more fully in Section III.C.2.,
below; (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. Each
class of shares shall also have the distinct features described
in Section III, below.
III. CLASS ARRANGEMENTS
A. FRONT-END SALES CHARGES AND CONTINGENT DEFERRED SALES
CHARGES
Class A shares shall be offered at net asset value plus a
front-end sales charge. The front-end sales charge shall be in
such amount as is disclosed in each Fund's current prospectus and
shall be subject to reductions for larger purchases and such
waivers or reductions as are determined or approved by the Board
of Trustees. Class A shares generally will not be subject to a
contingent deferred sales charge (a "CDSC"), although a CDSC may
be imposed in certain limited cases as disclosed in each Fund's
current prospectus or prospectus supplement.
Class B and Class C shares shall be offered at net asset
value without the imposition of a front-end sales charge. A CDSC
in such amount as is described in each Fund's current prospectus
or prospectus supplement shall be imposed on Class B and Class C
shares, subject to such waivers or reductions as are determined
or approved by the Board of Trustees.
Advisor Class and Class I shares are not subject to a front-
end sales charge or a CDSC.
B. RULE 12B-1 PLANS
Each Fund (other than Ivy Money Market Fund) has adopted a
service and distribution plan pursuant to Rule 12b-1 under the
1940 Act (a "12b-1 plan") under which it pays to Ivy Mackenzie
Distributors, Inc. (the "Distributor") an annual fee based on the
average daily net assets value of the Fund's outstanding Class A,
Class B and Class C shares, respectively.[FN2][Advisor Class and
Class I shares are not subject to Rule 12b-1 service or
distribution fees.] The maximum fees currently charged to each
Fund under its 12b-1 plan are set forth in the table below, and
are expressed as a percentage of the Fund's average daily net
assets.[FN3][Fees for services in connection with the Rule 12b-1
plans will be consistent with any applicable restriction imposed
by the National Association of Securities Dealers, Inc.]
The services that the Distributor provides in connection
with each Rule 12b-1 plan for which service fees[FN4][Each Fund
pays the Distributor at the annual rate of up to 0.25% of the
average daily net asset value attributable to its Class A, Class
B and Class C shares, respectively. Ivy Canada Fund pays an
additional service-related fee of 0.15% of the average daily net
asset value attributable to its Class A shares. In addition,
each Fund (other than Ivy Canada Fund) pays the Distributor a fee
for other distribution services at the annual rate of 0.75% of
the Fund's average daily net assets attributable to its Class B
and Class C shares. Ivy Canada Fund pays the Distributor an
additional amount for other distribution services at the annual
rate of 0.60% of average daily net assets attributable to its
Class B and Class C shares.] are paid include, among other
things, advising clients or customers regarding the purchase,
sale or retention of a Fund's Class A, Class B or Class C shares,
answering routine inquiries concerning the Fund, assisting
shareholders in changing options or enrolling in specific plans
and providing shareholders with information regarding the Fund
and related developments.
The other distribution services provided by the Distributor
in connection with each Fund's Rule 12b-1 plan include any
activities primarily intended to result in the sale of the Fund's
Class B and Class C shares. For such distribution services, the
Distributor is paid for, among other things, compensation to
broker-dealers and other entities that have entered into
agreements with the Distributor; bonuses and other incentives
paid to broker-dealers or such other entities; compensation to
and expenses of employees of the Distributor who engage in or
support distribution of a Fund's Class B or Class C shares;
telephone expenses; interest expense (only to the extent not
prohibited by a regulation or order of the SEC); printing of
prospectuses and reports for other than existing shareholders;
and preparation, printing and distribution of sales literature
and advertising materials.
RULE 12b-1 FEES
CLASS B AND
CLASS A CLASS A CLASS C SHARES
SHARES SHARES (SERVICE AND
(SERVICE (DISTRIBUTION DISTRIBUTION
FUND NAME FEE) FEES) FEES)
Ivy Asia Pacific Fund 0.25% 0.00% 1.00%
Ivy Bond Fund 0.25% 0.00% 1.00%
Ivy Canada Fund 0.25% 0.15% 1.00%
Ivy China Region Fund 0.25% 0.00% 1.00%
Ivy Developing Nations 0.25% 0.00% 1.00%
Fund
Ivy Global Fund 0.25% 0.00% 1.00%
Ivy Global Natural
Resources Fund 0.25% 0.00% 1.00%
Ivy Global Science &
Technology Fund 0.25% 0.00% 1.00%
Ivy Growth Fund 0.25% 0.00% 1.00%
Ivy Growth with Income
Fund 0.25% 0.00% 1.00%
Ivy High Yield Fund 0.25% 0.00% 1.00%
Ivy International Fund 0.25% 0.00% 1.00%
Ivy International
Fund II 0.25% 0.00% 1.00%
Ivy International
Small Companies Fund 0.25% 0.00% 1.00%
Ivy South America
Fund 0.25% 0.00% 1.00%
Ivy Money Market Fund* 0.00% 0.00% 0.00%
Ivy Pan-Europe
Fund 0.25% 0.00% 1.00%
Ivy US Emerging Growth
Fund 0.25% 0.00% 1.00%
* See footnote 1.
C. ALLOCATION OF EXPENSES AND INCOME
1. "TRUST" AND "FUND" EXPENSES
The gross income, realized and unrealized capital gains and
losses and expenses (other than "Class Expenses," as defined
below) of each Fund shall be allocated to each class on the basis
of its net asset value relative to the net asset value of the
Fund. Expenses so allocated include expenses of Ivy Fund that
are not attributable to a particular Fund or class of a Fund
("Trust Expenses") and expenses of a Fund not attributable to a
particular class of the Fund ("Fund Expenses"). Trust Expenses
include, but are not limited to, Trustees' fees and expenses;
insurance costs; certain legal fees; expenses related to
shareholder reports; and printing expenses. Fund Expenses
include, but are not limited to, certain registration fees (i.e.,
state registration fees imposed on a Fund-wide basis and SEC
registration fees); custodial fees; transfer agent fees; advisory
fees; fees related to the preparation of separate documents of a
particular Fund, such as a separate prospectus; and other
expenses relating to the management of the Fund's assets.
2. "CLASS" EXPENSES
The types of expenses attributable to a particular class
("Class Expenses") include: (a) payments pursuant to the Rule
12b-1 plan for that class[FN5][Advisor Class and Class I shares
bear no distribution or service fees.]; (b) transfer agent fees
attributable to a particular class; (c) printing and postage
expenses related to preparing and distributing shareholder
reports, prospectuses and proxy materials; (d) registration fees
(other than those set forth in Section C.1. above); (e) the
expense of administrative personnel and services as required to
support the shareholders of a particular class[FN6][Class I
shares bear lower administrative services fees relative to these
Funds' other classes of shares (i.e., Class I shares of the Funds
pay a monthly administrative services fee based upon each Fund's
average daily net assets at the annual rate of only 0.01%, while
Class A, Class B, Class C and Advisor Class shares pay a fee at
the annual rate of 0.10%).]; (f) litigation or other legal
expenses relating solely to a particular class; (g) Trustees'
fees incurred as a result of issues relating to a particular
class; and (h) the expense of holding meetings solely for
shareholders of a particular class. Expenses described in
subpart (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this
paragraph may (but need not) be allocated as Class Expenses, but
only if Ivy Fund's Board of Trustees determines, or Ivy Fund's
President and Secretary/Treasurer have determined, subject to
ratification by the Board of Trustees, that the allocation of
such expenses by class is consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of
1986, as amended.
In the event that a particular expense is no longer
reasonably allocable by class or to a particular class, it shall
be treated as a Trust Expense or Fund Expense, and in the event a
Trust Expense or Fund Expense becomes reasonably allocable as a
Class Expense, it shall be so allocated, subject to compliance
with Rule 18f-3 and to approval or ratification by the Board of
Trustees.
3. WAIVERS OR REIMBURSEMENTS OF EXPENSES
Expenses may be waived or reimbursed by any adviser to Ivy
Fund, by Ivy Fund's underwriter or any other provider of services
to Ivy Fund without the prior approval of Ivy Fund's Board of
Trustees.
D. EXCHANGE PRIVILEGES
Shareholders of each Fund have exchange privileges with the
other Funds. [FN7][Other exchange privileges, not described
herein, exist under certain other circumstances, as described in
each Fund's current prospectus or prospectus supplement.]
1. CLASS A:
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Fund (or for shares of another Fund
that currently offers only a single class of shares) ("new Class
A Shares") on the basis of the relative net asset value per Class
A share, plus an amount equal to the difference, if any, between
the sales charge previously paid on the outstanding Class A
shares and the sales charge payable at the time of the exchange
on the new Class A shares. Incremental sales charges are waived
for outstanding Class A shares that have been invested for 12
months or longer.
CONTINGENT DEFERRED SALES CHARGE SHARES. Class A
shareholders may exchange their Class A shares subject to a
contingent deferred sales charge ("CDSC"), as described in the
Prospectus ("outstanding Class A shares"), for Class A shares of
another Fund (or for shares of another Fund that currently offers
only a single class of shares) ("new Class A shares") on the
basis of the relative net asset value per Class A share, without
the payment of a CDSC that would otherwise be due upon the
redemption of the outstanding Class A shares. Class A
shareholders of a Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule (or period)
following an exchange, unless the CDSC schedule that applies to
the new Class A shares is higher (or such period is longer) than
the CDSC schedule (or period), if any, applicable to the
outstanding Class A shares, in which case the schedule (or
period) of the Fund into which the exchange is made shall apply.
2. CLASS B AND CLASS C:
Shareholders may exchange their Class B or Class C shares
("outstanding Class B shares" or "outstanding Class C shares,"
respectively) for the same class of shares of another Fund ("new
Class B shares" or "new Class C shares," respectively) on the
basis of the net asset value per Class B or Class C share, as the
case may be, without the payment of any CDSC that would otherwise
be due upon the redemption of the outstanding Class B or Class C
shares. Class B and Class C shareholders of a Fund exercising
the exchange privilege will continue to be subject to the Fund's
CDSC schedule (or period) following an exchange, unless, in the
case of Class B shareholders, the CDSC schedule that applies to
the new Class B shares is higher (or such period is longer) than
the CDSC schedule (or period) applicable to the outstanding
Class B shares, in which case the schedule (or period) of the
Fund into which the exchange is made shall apply.
3. ADVISOR CLASS AND CLASS I:
Advisor Class and Class I shareholders may exchange their
outstanding Advisor Class or Class I shares for shares of the
same class of another Fund on the basis of the net asset value
per Advisor Class or Class I share, as the case may be.
4. GENERAL:
Shares resulting from the reinvestment of dividends and
other distributions will not be charged an initial sales charge
or CDSC when exchanged into another Fund.
With respect to Fund shares subject to a CDSC, if less than
all of an investment is exchanged out of the Fund, the shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or reinvestment of distributions of the original investment
as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged
shares.
E. CONVERSION FEATURE
Class B shares of a Fund convert automatically to Class A
shares of the Fund as of the close of business on the first
business day after the last day of the calendar quarter in which
the eighth anniversary of the purchase date of the Class B shares
occurs. The conversion will be based on the relative net asset
values per share of the two classes, without the imposition of
any sales load, fee or other charge. For purposes of calculating
the eight year holding period, the "purchase date" shall mean the
date on which the Class B shares were initially purchased,
regardless of whether the Class B shares that are subject to the
conversion were obtained through an exchange (or series of
exchanges) from a different Fund. For purposes of conversion of
Class B shares, Class B shares acquired through the reinvestment
of dividends and capital gain distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time
any Class B shares in the shareholder's regular account (other
than those shares in the sub-account) convert to Class A shares,
a pro rata portion of the Class B shares in the sub-account will
also convert to Class A shares. The portion will be determined
by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares
not acquired through the reinvestment of dividends and capital
gain distributions.
IV. BOARD REVIEW
A. INITIAL APPROVAL
The Board of Trustees of Ivy Fund, including a majority of
the Trustees who are not interested persons of Ivy Fund, as
defined under the 1940 Act (the "Independent Trustees"), at a
meeting held on December 1-2, 1995, initially approved this Plan
based on a determination that the Plan, including the expense
allocation, is in the best interests of each class of shares of
each Fund individually and Ivy Fund as a whole.[FN8][The Plan, as
initially approved, pertained only to the Class A and Class B
shares of the Funds, and the Class I shares of Ivy Bond Fund and
Ivy International Fund. The Plan was amended and restated on
April 30, 1996 to reflect the establishment and designation of
Class C shares of the Funds. The Plan was further amended and
restated on June 8, 1996 to reflect the establishment and
designation of Ivy Global Science and Technology Fund. The Plan
was further amended and restated on December 7, 1996 to reflect
the establishment and designation of Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy International Small Companies
Fund. The Plan was further amended and restated on February 8,
1997 to reflect the establishment and designation of Ivy Pan-
Europe Fund. The Plan was further amended and restated on April
30, 1997 to reflect the establishment and designation of Ivy
International Fund II. The Plan was further amended and restated
on December 6, 1997 to reflect the establishment and designation
of the Fund's Advisor Class of shares. The Plan was further
amended and restated as of the date set forth on the first page
hereof to reflect the redesignation of Ivy International Bond
Fund as Ivy High Yield Fund.]
B. APPROVAL OF AMENDMENTS
Before any material amendments to this Plan, Ivy Fund's
Board of Trustees, including a majority of the Independent
Trustees, must find that the Plan, as proposed to be amended
(including any proposed amendments to the method of allocating
Class and/or Fund Expenses), is in the best interests of each
class of shares of each Fund individually and Ivy Fund as a
whole. In considering whether to approve any proposed
amendment(s) to the Plan, the Trustees of Ivy Fund shall request
and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendment(s) to the Plan.
Such information shall address the issue of whether any waivers
or reimbursements of advisory or administrative fees could be
considered a cross-subsidization of one class by another, and
other potential conflicts of interest between classes.
C. PERIODIC REVIEW
The Board of Trustees of Ivy Fund shall review the Plan as
frequently as it deems necessary, consistent with applicable
legal requirements.
V. EFFECTIVE DATE
The Plan first became effective as of January 1, 1996.
