As filed electronically with the Securities and Exchange Commission on
May 3, 1999
(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. 110 [ 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
become effective on May 3, 1999 pursuant to paragraph (b)
of Rule 485.
<PAGE>
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 110 contains combined Prospectuses and
Statements of Additional Information ("SAIs") for the nineteen series of Ivy
Fund (the "Registrant"). (i) the Prospectuses and SAIs relating to the Class A,
Class B and Class C shares, and to the Advisor Class shares, respectively, of
Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Developing Nations Fund and
Ivy South America Fund; (ii) the Prospectus and Statement of Additional
Information relating to the Class A, Class B, Class C and Class I shares of Ivy
International Fund; (iii) the Prospectuses and SAIs relating to the Class A,
Class B, Class C and Class I shares, and to the Advisor Class shares,
respectively, of Ivy Growth Fund, Ivy Growth with Income Fund, Ivy US Blue Chip
Fund and Ivy US Emerging Growth Fund; (iv) the Prospectuses and SAIs relating to
the Class A, Class B, Class C and Class I shares, and to the Advisor Class
shares, respectively, of Ivy European Opportunities Fund, Ivy Global 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; and (v) the Prospectuses and SAIs relating to the Class A, Class B, Class
C and Class I shares, and to the Advisor Class shares, respectively, of Ivy Bond
Fund, Ivy Strategic Bond Fund and Ivy Money Market Fund.
ITEMS REQUIRED BY FORM N-1A:
PART A:
ITEM 1 FRONT AND BACK COVER PAGES: Front and back cover pages
ITEM 2 RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE :
Principal Investment Strategies; Principal Risks
ITEM 3 RISK/RETURN SUMMARY: FEE TABLE: Fees and Expenses
ITEM 4 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS: Principal Investment
Strategies; Principal Risks; Additional Information About Investment
Strategies And Risks
ITEM 5 MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable
ITEM 6 MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE: Management
ITEM 7 SHAREHOLDER INFORMATION: Shareholder Information
ITEM 8 DISTRIBUTION ARRANGEMENTS: Shareholder Information
ITEM 9 FINANCIAL HIGHLIGHTS INFORMATION: Not applicable
PART B
ITEM 10 COVER PAGE AND TABLE OF CONTENTS: Cover Page; Table of Contents
ITEM 11 FUND HISTORY: General Information
ITEM 12 DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS: Investment
Objectives, Strategies and
Risks; Investment Restrictions; Appendix A
ITEM 13 MANAGEMENT OF THE FUND: Investment Advisory And Other Services
ITEM 14 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Trustees and
Officers
ITEM 15 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory And Other
Services
ITEM 16 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage Allocation
ITEM 17 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and Voting Rights
ITEM 18 PURCHASE, REDEMPTION AND PRICING OF SHARES: Special Rights and
Privileges; Capitalization and Voting Rights; Net Asset Value
ITEM 19 TAXATION OF THE FUND: Taxation
ITEM 20 UNDERWRITERS: Distribution Services
ITEM 21 CALCULATION OF PERFORMANCE DATA: Performance Information
ITEM 22 FINANCIAL STATEMENTS: Financial Statements
<PAGE>
<PAGE> 1
Ivy Funds Logo
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 EMERGING MARKET FUNDS
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS FUND
IVY SOUTH AMERICA FUND
Ivy Fund is a registered open-end investment company consisting of
nineteen separate portfolios. This Prospectus relates to the Class A,
Class B and Class C shares of the four funds listed above (the "Funds").
The Funds also offer Advisor Class shares, which are described in a
separate prospectus.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this
Prospectus. Any representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
-- CONTENTS
2 Ivy Asia Pacific Fund
4 Ivy China Region Fund
6 Ivy Developing Nations Fund
8 Ivy South America Fund
11 Additional information
about investment strategies
and risks
15 Management
16 Shareholder information
22 Financial highlights
29 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
Mackenzie Logo
<PAGE> 2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
ASIA PACIFIC
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term growth. Consideration of
current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities issued in Asia
Pacific countries, which include China, Hong Kong, India, Indonesia, Malaysia,
Pakistan, the Philippines, Singapore, Sri Lanka, South Korea, Taiwan, Thailand
and Vietnam.
The Fund's management team uses a value strategy to identify companies and
markets that have solid long-term growth prospects and appear to be undervalued.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the securities markets of many Asia-Pacific
countries fall into this category, the Fund is exposed to the following
additional risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: Investing in the Asia-Pacific region involves special risks
beyond those described above. For example, certain Asia-Pacific countries may be
vulnerable to trade barriers and other protectionist measures that could have an
adverse effect on the value of the Fund's portfolio. The limited size of the
markets for some Asia-Pacific securities can also make them more susceptible to
investor perceptions which can impact their value and liquidity.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors who are seeking long term growth
potential in this sector of the world, but who can accept potentially dramatic
fluctuations in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 1, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
<S> <C>
(CHART)
'97' -39.58
- ---- ------
'98' -6.86
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 43.90%
Worst quarter Q2 '98: (34.21%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
--------------------------------------------------------------------------
LIPPER
MSCI FAR ASIA
EAST FREE PACIFIC
(EX-JAPAN) (EX-JAPAN)
CLASS A CLASS B CLASS C INDEX CATEGORY
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ (12.21%) (12.10%) (8.29%) (7.39%) (9.05%)
Since Inception*..... (27.29%) (27.09%) (28.60%) (28.94%) (23.78%)
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for all Classes was January 1, 1997.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- ---------------------------------------------------------
CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering
price)...................... 5.75% none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)...................... none 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends................... none none none
Redemption fee*............. 2.00%** none none
Exchange fee................ none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------------
CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Management fees............. 1.00% 1.00% 1.00%
Distribution and/or service
(12b-1) fees................ 0.25% 1.00% 1.00%
Other expenses.............. 4.28% 4.41% 4.30%
Total annual Fund
operating expenses.......... 5.53% 6.41% 6.30%
Expenses reimbursed*........ 3.38% 3.38% 3.38%
Net Fund
operating expenses*......... 2.15% 3.03% 2.92%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
-----------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 780 $ 806 $ 306 $ 395 $ 295
3rd 1,315 1,346 1,046 1,013 1,013
5th 1,875 2,087 1,807 1,754 1,754
10th 3,392 3,611 3,611 3,708 3,708
</TABLE>
3
<PAGE> 4
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
CHINA REGION
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
companies that are located or have a substantial business presence in the China
Region, which includes China, Hong Kong, Taiwan, South Korea, Singapore,
Malaysia, Thailand, Indonesia and the Philippines.
The Fund may also invest in equity securities of companies whose current or
expected performance is considered to be strongly associated with the China
Region. A large portion of the Fund is likely to be invested in equity
securities of companies that trade in Hong Kong.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the securities markets of many China Region
countries may be considered "developing", the Fund may be exposed to one or more
of the following additional risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: Mainland China may be subject to a much higher degree of
economic, political and social instability than more developed countries, which
could at any time result in the disruption of its principal financial markets
(and to a lesser extent, those of other China Region countries). A number of
China Region countries also depend heavily on international trade, which makes
their securities markets particularly sensitive to the trade policies and
economic conditions of their principal trading partners.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors who are seeking long-term growth
potential in this sector of the world, but who can accept potentially dramatic
fluctuations in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
4
<PAGE> 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on October 22, 1993 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------------------
<S> <C>
(CHART)
'94' -24.88
- ---- ------
'95' 1.59
'96' 20.50
'97' -21.94
'98' -20.56
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 25.48%
Worst quarter Q4 '97: (30.21%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
-----------------------------------------------------------------------------------------
LIPPER
CLASS CHINA HANG MSCI IFC
---------------------------- REGION SENG TAIWAN CHINA
A B C CATEGORY INDEX INDEX INDEX
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Past year............ (25.13%) (24.99%) (21.81%) (17.51%) (6.29%) (22.35%) --
Past 5 years......... (11.68%) (11.63%) n/a (11.54%) (3.31%) 0.57% --
Since inception:
Class A & B*......... (8.76%) (8.55%) n/a (8.05%)** 2.77% 9.93% --
Class C***........... n/a n/a (13.93%) (12.22%) (3.21%) (1.19%) --
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for the Fund's Class A and Class B shares was October
22, 1993.
**Since October 28, 1993
***The inception date for the Fund's Class C shares was April 30, 1996.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................. 5.75% none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)................. none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends... none none none
Redemption fee*........ 2.00%** none none
Exchange fee........... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees........ 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 1.51% 1.54% 1.44%
Total annual Fund
operating expenses..... 2.76% 3.54% 3.44%
Expenses reimbursed*... 0.56% 0.56% 0.56%
Net Fund
operating expenses*.... 2.20% 2.98% 2.88%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 785 $ 801 $ 301 $ 391 $ 291
3rd 1,329 1,331 1,031 1,001 1,001
5th 1,898 1,982 1,782 1,735 1,735
10th 3,436 3,587 3,587 3,671 3,671
</TABLE>
5
<PAGE> 6
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
DEVELOPING
NATIONS FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term growth. Consideration of
current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities of companies
that are located in, or are expected to profit from, countries whose markets
are generally considered to be "developing" or "emerging".
The Fund may invest more than 25% of its assets in a single country, but usually
will hold securities from at least three emerging market countries in its
portfolio.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the Fund normally invests a substantial portion of
its assets in these countries, it is exposed to the following additional risks:
- - securities that are even less liquid and more volatile than those in more
developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors who are seeking long-term growth
potential in the developing nations sector, but who can accept potentially
dramatic fluctuations in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on November 1, 1994 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------------------
(Chart)
<S> <C>
'95' 6.40%
'96' 11.83
'97' -27.42
'98' -11.67
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 29.00%
Worst quarter Q4 '97: (27.28%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
---------------------------------------------------------------------------------
MSCI IFC MORNINGSTAR
CLASS EMERGING EMERGING EMERGING
------------------------- MARKETS MARKETS MARKETS
A B C FREE INDEX INDEX UNIVERSE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Past year............ (16.75%) (16.73%) (13.16%) (26.34%) (21.09%) (26.82%)
Since inception:
Class A & B*......... (10.76%) (10.60%) n/a (12.30%) (12.35%) (9.09%)
Class C**............ n/a n/a (15.22%) (15.50%) (15.71%) (12.23%)
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for the Fund's Class A and Class B shares was November
1, 1994.
**The inception date for the Fund's Class C shares was April 30, 1996.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering
price)..................... 5.75% none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)..................... none 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends.................. none none none
Redemption fee*............ 2.00%** none none
Exchange fee............... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------
<S> <C> <C> <C>
Management fees........ 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 2.22% 2.25% 2.25%
Total annual Fund
operating expenses..... 3.47% 4.25% 4.25%
Expenses reimbursed*... 1.29% 1.29% 1.29%
Net Fund
operating expenses*.... 2.18% 2.96% 2.96%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be as
follows:
EXAMPLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 783 $ 799 $ 299 $ 399 $ 299
3rd 1,325 1,326 1,026 1,026 1,026
5th 1,891 1,975 1,775 1,775 1,775
10th 3,422 3,573 3,573 3,747 3,747
</TABLE>
7
<PAGE> 8
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
SOUTH AMERICA
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal objective is long-term growth. Consideration of current
income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities and government
and corporate debt securities issued throughout South America, Central America
and the Spanish-speaking islands of the Caribbean.
The Fund is likely to have significant investments in Argentina, Brazil, Chile,
Colombia, Peru and Venezuela.
The Fund may invest in low rated debt securities to increase its potential
yield.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects or underlying asset
values.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Many of the Fund's debt security
holdings may be considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). Low-rated debt securities are considered speculative
and could significantly weaken the Fund's returns if the issuer defaults on its
payment obligations.
NON-DIVERSIFICATION RISK: The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, and may therefore invest a greater percentage of
its assets in a particular issuer than a "diversified" fund. As a result, the
Fund may also be more susceptible than a diversified fund to the price movements
of certain securities it holds in its portfolio.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
8
<PAGE> 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The risks of investing in foreign securities are more acute in countries with
developing economies, which characterizes many of the countries in which the
Fund may invest. As a result, the Fund is exposed to the following additional
risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: The securities markets of certain Latin American countries are
substantially smaller, less developed, less liquid and more volatile than major
securities markets elsewhere in the world. For example, the limited market size
for a number of the Fund's portfolio holdings makes their prices vulnerable to
investor perceptions and traders who control large positions. Some Latin
American countries have also experienced unusually high inflation rates.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential in
this sector of the world, but who can accept potentially dramatic fluctuations
in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some
indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and how the Fund's
average annual returns since its inception on November 1, 1994
compare with those of a broad measure of market performance. The
Fund's past performance is not an indication of how the Fund will
perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------
(CHART)
<S> <C>
'95' -17.28
'96' 24.22
'97' 7.03
'98' -36.07
</TABLE>
*Any applicable sales charges and account fees are not reflected,
and if they were the returns shown above would be lower. The
returns for the Fund's other classes of shares during these
periods were different from those of Class A because of variations
in their respective expense structures.
Best quarter Q2 '96: 14.34%
Worst quarter Q3 '98: (30.26%)
9
<PAGE> 10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
-----------------------------------------------------------
SINCE INCEPTION
PAST ------------------------
YEAR CLASS A & B* CLASS C**
-----------------------------------------------------------
<S> <C> <C> <C>
Class A................ (39.74%) (13.13%) n/a
Class B................ (39.76%) (13.00%) n/a
Class C................ (37.69%) n/a (11.75%)
MSCI EMF Latin America
Index.................. (35.11%) (6.61%) (2.28%)
MSCI Brazil Index...... (44.07%) (8.88%) (5.58%)
MSCI Argentina Index... (27.30%) (2.00%) (2.03%)
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for the Fund's Class A and Class B shares was November
1, 1994.
**The inception date for the Fund's Class C shares was April 30, 1996.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- --------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price).... 5.75% none none
Maximum deferred sales charge
(load)(as a percentage of
purchase price).................. none 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends........................ none none none
Redemption fee*.................. 2.00%** none none
Exchange fee..................... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C>
Management fees.................. 1.00% 1.00% 1.00%
Distribution and/or service
(12b-1) fees..................... 0.25% 1.00% 1.00%
Other expenses................... 3.64% 3.69% 3.72%
Total annual Fund
operating expenses............... 4.89% 5.69% 5.72%
Expenses reimbursed*............. 2.71% 2.71% 2.71%
Net Fund
operating expenses*.............. 2.18% 2.98% 3.01%
</TABLE>
*The Fund's Manager has agreed to reimburse the Fund's expenses for
the current fiscal year to the extent necessary to ensure that the
Fund's Annual Fund Operating Expenses, when calculated at the Fund
level, do not exceed 1.95% of the Fund's average net assets
(excluding 12b-1 fees and taxes). For each of the following nine
years, the Investment Manager will ensure that these expenses do
not exceed 2.50% of the Fund's average net assets.
------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 783 $ 801 $ 301 $ 404 $ 304
3rd 1,325 1,332 1,032 1,041 1,041
5th 1,891 1,985 1,785 1,799 1,799
10th 3,423 3,587 3,587 3,792 3,792
</TABLE>
10
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY ASIA PACIFIC FUND: The Fund seeks to achieve its investment objective of
long-term growth by investing primarily in securities issued in countries
throughout the Asia Pacific region, which includes China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, South
Korea, Taiwan, Thailand and Vietnam. The Fund usually invests in at least three
different countries, and does not intend to concentrate its investments in any
particular industry.
IVY CHINA REGION FUND: The Fund seeks to achieve its investment objective of
long-term capital growth primarily by investing in the equity securities of
companies that are expected to profit from the economic development and growth
of the China Region through a direct business connection (such as an exchange
listing or significant profit base) in one or more China Region countries. The
Fund may invest more than 25% of its assets in the securities of issuers in a
single China Region country, and could have significantly more than 50% of its
assets invested in Hong Kong. The Fund expects to invest the balance of its
assets in the equity securities of companies whose current or expected
performance is considered to be strongly associated with the China Region. The
Fund's management team seeks to reduce risk by focusing on companies with strong
foreign joint venture partners, well-positioned consumer franchises or
monopolies, or that operate in strategic or protected industries.
IVY DEVELOPING NATIONS FUND: The Fund seeks to achieve its principal objective
of long-term capital growth by investing primarily in the equity securities of
companies that the Fund's manager believes will benefit from the economic
development and growth of emerging markets. The Fund considers an emerging
market country to be one that is generally viewed as "developing" or "emerging"
by the World Bank, the International Finance Corporation or the United Nations.
The Fund usually invests its assets in at least three different emerging market
countries, and may invest at least 25% of its assets in the securities of
issuers located in a single country.
IVY SOUTH AMERICA FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the securities markets of
South America, Mexico and Central America. The Fund normally invests its assets
in at least three different countries, and expects to focus its investments in
Argentina, Brazil, Chile, Colombia, Peru and Venezuela. The Fund's holdings are
concentrated in high-quality companies, selected for both their defensive
strengths and long-term prospects.
The Fund does not expect to concentrate its investments in any particular
industry. The Fund may, however, invest more than 5% of a portion of its assets
in a single issuer (see "Non-diversification risk" on page 8).
ALL FUNDS: The countries in which each Fund invests are selected on the basis of
a mix of factors that include long-term economic growth prospects, anticipated
inflation levels, and the effect of applicable government policies on local
business conditions. The Funds are managed using a value approach which focuses
on financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
11
<PAGE> 12
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: Since the Funds are likely to invest heavily in countries with
economies or securities markets that are relatively undeveloped, each Fund is
more susceptible to the risks associated with these types of securities than
funds that invest primarily in more established markets. Following is a
description of these risks, along with the risks commonly associated with the
other securities and investment techniques that each Fund's manager considers
important in achieving the Fund's investment objective or in managing its
exposure to risk (and that could therefore have a significant effect on the
Fund's returns). Other investment methods that the Funds may use (such as
derivative investments), but that do not play a key role in their overall
investment strategies, are described in the Funds' Statement of Additional
Information (see back cover page for information on how you can receive a free
copy).
- - COMMON STOCKS: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - DEBT SECURITIES: The Funds may invest in debt securities, and Ivy South
America Fund may at any given time have a significant portion of its assets
invested in such instruments. The value of debt securities generally increases
as interest rates decline. Conversely, rising interest rates tend to cause the
value of debt securities to decrease. A Fund's portfolio is therefore
susceptible to losses in a rising interest rate environment. The market value
of debt securities also tends to vary according to the relative financial
condition of the issuer. Bonds with longer maturities also tend to be more
volatile than bonds with shorter maturities.
A Fund may invest a portion of its assets in low-rated debt securities
(sometimes referred to as "high yield" or "junk" bonds). In general, low-
rated debt securities 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. For this reason, these
bonds are considered speculative and could significantly weaken a Fund's
returns.
Ivy South America Fund may have significant holdings in sovereign debt. For a
variety of reasons (such as cash flow problems, limited foreign reserves, and
political constraints), the governmental entity that controls the repayment of
sovereign debt may not be able or willing to repay the principal or interest
when due. A governmental entity's ability to honor its debt obligations to the
Fund may also be contingent on its receipt from others (such as the
International Monetary Fund and more solvent foreign governments) of specific
disbursements, which may in turn be conditioned on the perceived health of the
governmental entity's economy and/or its implementation of economic reforms.
If any of these conditions fail, the Fund could lose the entire value of its
investment for an indefinite period of time.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect each Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given
12
<PAGE> 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
time. For example, the securities markets of many foreign countries may be
smaller, less liquid and subject to greater price volatility than those in the
U.S. Foreign investing may also involve brokerage costs and tax considerations
that are not usually present in the U.S. markets. Many of the Funds'
securities also are denominated in foreign currencies and the value of each
Fund's investments, as measured in U.S. dollars, may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. Currency conversions can also be costly.
Other factors that can affect the value of a Fund's foreign investments include
the comparatively weak supervision and regulation by some foreign governments of
securities exchanges, brokers and issuers, and the fact that many foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards. It may also be difficult to obtain reliable information
about the securities and business operations of certain foreign issuers.
Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - increased settlement delays;
- - unusually high inflation rates (which in extreme cases can cause the value of
a country's assets to erode sharply);
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DEPOSITORY RECEIPTS: Each Fund may acquire interests in foreign issuers in the
form of sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs") and similar types of depository receipts. ADRs
typically are issued by a U.S. bank or trust company and represent ownership
of the underlying securities issued by a foreign corporation. GDRs and other
types of depository receipts are usually issued by foreign banks or trust
companies. Each Fund's investments in ADRs, GDRs and other depository receipts
are viewed as investments in the underlying securities.
Depository receipts can be difficult to price and are not always
exchange-listed. Unsponsored depository programs also are organized
independently 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.
- - FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND FORWARD FOREIGN CURRENCY CONTRACTS:
A Fund may, but is not required to, use foreign currency exchange transactions
and forward foreign currency contracts to hedge certain market risks (such as
interest rates, currency exchange rates and broad or specific market
movement). These investment techniques involve a number of risks, including
the possibility of default by the counterparty to the transaction and, to the
extent the adviser's judgment as to certain market movements is incorrect, the
risk of losses that are greater than if the investment technique had not been
used. For example, there may be an imperfect correlation between a Fund's
portfolio holdings of securities denominated in a particular currency and the
forward contracts entered into by the Fund. An imperfect correlation of this
type may prevent a Fund from achieving the intended hedge or expose the Fund
13
<PAGE> 14
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
to the risk of currency exchange loss. In addition, although the use of these
investment techniques for hedging purposes should tend to minimize the risk of
loss due to a decline in the value of the hedged position, they also tend to
limit any potential gain that might result from an increase in the position's
value.
- - ILLIQUID SECURITIES: Each Fund may invest up to 15% of its net assets in
"illiquid securities," which are assets that may not be disposed of in the
ordinary course of business within seven days at roughly the value at which
the Fund has valued the assets. Some of these may by "restricted securities,"
which cannot be sold to the public without registration under the Securities
Act of 1933 (in the absence of an exemption) or because of other legal or
contractual restrictions on resale. Thus, while illiquid securities may offer
the potential for higher returns than more readily marketable securities,
there is a risk that a Fund will not be able to dispose of them promptly at an
acceptable price.
- - TEMPORARY DEFENSIVE POSITIONS: Each Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective.
- - BORROWING: For temporary or emergency purposes, Ivy China Region Fund may
borrow up to 10% of the value of its total assets from qualified banks. Ivy
Asia Pacific Fund, Ivy Developing Nations Fund and Ivy South America Fund may
borrow up to one-third of the value of its total assets from qualified banks,
but will not buy securities whenever its outstanding borrowings exceed 10% of
the value of its total assets. Borrowing may exaggerate the effect on a Fund's
share value of any increase or decrease in the value of the securities it
holds. Money borrowed will also be subject to interest costs.
- -- OTHER IMPORTANT INFORMATION
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
14
<PAGE> 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc.("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other fifteen series of Ivy
Fund. For the Funds' fiscal year ending December 31, 1998, the Funds paid IMI a
fee that was equal to 1.00% of each Funds' respective average net assets.
- -- PORTFOLIO MANAGEMENT
Each Fund is managed by a team of investment professionals that is supported by
research analysts who acquire information on regional and country-specific
economic and political developments and monitor individual companies. These
analysts use a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third-party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
15
<PAGE> 16
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge (see "Choosing the
appropriate class of shares"). Since the Funds normally invest in securities
that are listed on foreign exchanges that may trade on weekends or other days
when the Funds do not price their shares, each Fund's share value may change on
days when shareholders will not be able to purchase or redeem the Fund's shares.
- -- HOW TO BUY SHARES
Purchasing Fund shares involves "Choosing the Appropriate Class of Shares" and
"Submitting Your Purchase Order". Please read these sections carefully before
investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
The essential features of the Funds' different classes of shares are described
below. If you do not specify on your Account Application which class of shares
you are purchasing, it will be assumed that you are purchasing Class A shares.
Each Fund has adopted separate distribution plans pursuant to Rule 12b-1 under
the 1940 Act for its Class A, B and C shares that allow the Fund to pay
distribution and other fees for the sale and distribution of its shares and for
services provided to shareholders. Because these fees are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
- - CLASS A SHARES: Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% (the "offering price").The sales charge may be reduced
or eliminated if certain conditions are met (see "Additional Purchase
Information"). Class A shares are subject to a 0.25% Rule 12b-1 service fee.
16
<PAGE> 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - CLASS B SHARES: Class B shares are offered at net asset value, without an
initial sales charge, but subject to a contingent deferred sales charge
("CDSC") that declines from 5% to zero on certain redemptions within six years
of purchase. Class B shares are subject to a 0.75% Rule 12b-1 distribution fee
and a 0.25% Rule 12b-1 service fee, and convert automatically into Class A
shares eight years after purchase.
- - CLASS C SHARES: Class C shares are offered at net asset value, without an
initial sales charge, but subject to a CDSC of 1% for redemptions within the
first year of purchase. Class C shares are subject to a 0.75% Rule 12b-1
distribution fee and a 0.25% Rule 12b-1 service fee.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000
Minimum subsequent
investment*.......... $100 $100 $100
Initial sales
charge............... Maximum 5.75%, None None
with options
for a reduction
or waiver
CDSC................. None, except on Maximum 5.00%, 1.00% for the
certain NAV declines over first year
purchases six years
Service and
distribution fees.... 0.25% service 0.75% 0.75%
fee distribution distribution
fee and 0.25% fee and 0.25%
service fee service fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- ADDITIONAL PURCHASE INFORMATION
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth in
the following table (which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED 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........ 4.00% 3.09% 2.50%
$500,000 or over*.... 0.00% 0.00% 0.00%
</TABLE>
*A CDSC of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
- - HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher)of all Ivy Fund Class A shares you
own.
- A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
- - HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the
following methods:
- - through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- - under certain qualified retirement plans;
- - as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- - as an employee of a selected dealer; or
- - through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Funds 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 SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc.("IMDI"),
the Fund's distributor, may pay the dealer or agent (out of IMDI's own
resources) for its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASE AMOUNT COMMISSION
- --------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those 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 time period.
17
<PAGE> 18
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by the
Distributor. This privilege will apply only to Class A shares of a Fund that are
purchased using proceeds obtained by such clients through redemption of another
mutual fund's shares on which a sales charge was paid. Purchases must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
after purchase.
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 you redeem your Class C
shares within one year of purchase they 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 following rates:
<TABLE>
<CAPTION>
- ----------------------------------------------------
CDSC AS A PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- ----------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares 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. No charge will be assessed on increases in account value
above the original purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - Shares held more than six years;
- - Shares acquired through reinvestment of dividends and distributions;
- - Shares subject to the lowest CDSC percentage, on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation, which is
not subject to a CDSC, redeemed first; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
- - Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- - Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- - Redemption resulting from a tax-free return of excess contribution to an IRA.
- - Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- - Withdrawals through the Systematic Withdrawal Plan of up to 12% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for federal income
tax purposes. Class C shares do not have a similar conversion privilege.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check the class of shares you wish to
purchase.(see page 17 for minimum initial investments.) Deliver your application
materials to your registered repre-
18
<PAGE> 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
sentative or selling broker, or send them to one of the following addresses:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Highway
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
on this page. Be sure that all registered owners listed on the account sign
the request. Medallion signature guarantees and supporting legal documentation
may be required. When you redeem, IMSC will normally send redemption proceeds
to you on the next business day, but may take up to seven days (or longer in
the case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
19
<PAGE> 20
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
REDEMPTION FEE: The Funds can experience substantial price fluctuations and are
intended for long-term investors. Redemption fees for the Funds are intended to
encourage long-term investment, to avoid transaction and other expenses caused
by early redemptions, and to facilitate portfolio management. This fee may be
waived at the discretion of IMSC. Effective June 1, 1999, the Funds may charge a
2.00% fee for redemptions or exchanges within one month of the date of purchase.
This fee is not a CDSC, is not a commission, and does not benefit IMI or IMSC in
any way. The redemption fee will be assessed on the net asset value of the
shares redeemed or exchanged and will be deducted from the redemption proceeds
otherwise payable to the shareholder. Each Fund will retain any fee charged.
OTHER IMPORTANT REDEMPTION INFORMATION:
- - A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within six years of purchase, and to Class C shares that are redeemed
within one year of purchase.
- - If you own shares of more than one class of the Fund, the Fund will redeem
first the shares having the highest 12b-1 fees, unless you instruct otherwise.
- - Any shares subject to a CDSC will be redeemed last unless you specifically
elect otherwise.
- - Shares will be redeemed in the order described under "Additional Purchase
Information--Class B and Class C Shares".
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important Exchange Information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 19 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee or cancel a shareholder's exchange privilege if at any time it
appears that such market-timing strategies are being used. For example,
shareholders exchanging more than five times in a 12-month period may be
considered to be using market-timing strategies. A redemption fee will be
charged on the asset value of shares exchanged within one month of purchase.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
20
<PAGE> 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will be mailed to the address of record unless otherwise
instructed in writing.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends annually. The Funds will distribute net investment
income and net realized capital gains, if any, at least once a year. The Funds
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 Internal Revenue Code of 1986,
as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by a Fund during January of the
following calendar year. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by your
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Fund
under applicable state or local law.
21
<PAGE> 22
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Funds' financial performance for the past five years (or less if a Fund has
a shorter operating history), and reflects results for a single Fund share.
The total returns in the table represent the rate an investor would have
earned (or lost) each year on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Fund's
financial statements, is included in its Annual Report to shareholders
(which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------------------------------------------------
IVY ASIA PACIFIC FUND for the year ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.01 $ 10.00 $ 5.99 $ 10.00 $ 5.99 $ 10.00
--------------------------------------------------------------
Loss from investment operations
Net investment loss (a)................................... .03 .02 (.01) -- (.01) --
Net gains or losses on securities (both realized and
unrealized)............................................. (.44) (3.98) (.44) (4.00) (.43) (3.99)
--------------------------------------------------------------
Total from investment operations.......................... (.41) (3.96) (.45) (4.00) (.44) (3.99)
--------------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- .01 -- -- -- --
In excess of net investment income...................... .03 .02 .01 .01 .01 .02
Distributions from capital gains.......................... .01 -- -- -- -- --
--------------------------------------------------------------
Total distributions..................................... .04 .03 .01 .01 .01 .02
--------------------------------------------------------------
Net asset value, end of period.............................. $ 5.56 $ 6.01 $ 5.53 $ 5.99 $ 5.54 $ 5.99
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%)(c)......................................... (6.86) (39.58) (7.48) (39.96) (7.37) (39.94)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,393 $ 692 $ 2,197 $ 929 $ 1,855 $ 764
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 2.77 2.11 3.65 2.86 3.54 2.74
Without expense reimbursement (%)......................... 6.15 10.17 7.03 10.92 6.92 10.80
Ratio of net investment income to average net assets
(%)(a).................................................... .53 .63 (.35) (.12) (.24) --
Portfolio turnover rate (%)................................. 86 1 86 1 86 1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY CHINA REGION FUND ------------------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 8.04 $ 10.30 $ 8.58 $ 8.61 $ 11.55
------------------------------------------------------------------------
Income (loss) from investment operations
Net investment loss (a).............................. .13 .02(b) .03 .14 .05
Net gains or losses on securities (both realized and
unrealized)........................................ (1.78) (2.28)(b) 1.74 (.01) (2.91)
------------------------------------------------------------------------
Total from investment operations..................... (1.65) (2.26) 1.77 .13 (2.86)
------------------------------------------------------------------------
Less distributions
Dividends
From net investment income......................... .09 -- .03 .14 .05
In excess of net investment income................. -- -- .02 -- .03
Distributions in excess of capital gains............. -- -- -- .02 --
--------------------------------------------------------------------
Total distributions................................ .09 -- .05 .16 .08
------------------------------------------------------------------------
Net asset value, end of period......................... $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61
------------------------------------------------------------------------
------------------------------------------------------------------------
Total return (%)....................................... (20.56)(c) (21.94)(c) 20.50(c) 1.59(c) (24.88)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............... $ 9,061 $ 12,020 $ 15,290 $ 12,855 $ 13,180
Ratio of expenses to average net assets (d)
With expense reimbursement (%)....................... 2.30 2.44 2.20 2.20 2.20
Without expense reimbursement (%).................... 2.86 2.51 2.48 2.73 2.76
Ratio of net investment income to average net assets
(%)(a)............................................... 1.60 .28 .32 1.61 .55
Portfolio turnover rate (%)............................ 56 20 22 25 4
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------------------------------------------------------------------------------
for the period
April 30, 1996
for the year for the year ended (Commencement)
ended December 31, December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7.96 $ 10.28 $ 8.58 $ 8.61 $ 11.55 $ 7.94 $ 10.24 $ 9.44
- -------------------------------------------------------------------------------------------------------------
.05 (.04)(b) (.04) .08 (.02) .08 (.03)(b) --
(1.73) (2.28)(b) 1.74 (.02) (2.92) (1.75) (2.27)(b) .89
- -------------------------------------------------------------------------------------------------------------
(1.68) (2.32) 1.70 .06 (2.94) (1.67) (2.30) .89
- -------------------------------------------------------------------------------------------------------------
.04 -- -- .08 -- .02 -- --
-- -- -- -- -- -- -- .09
-- -- -- .01 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
.04 -- -- .09 -- .02 -- .09
- -------------------------------------------------------------------------------------------------------------
$ 6.24 $ 7.96 $ 10.28 $ 8.58 $ 8.61 $ 6.25 $ 7.94 $ 10.24
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
(21.04)(c) (22.57)(c) 19.67(c) .83(c) (25.45)(c) (21.02)(c) (22.46)(c) 9.39 (f)
$ 6,080 $ 7,893 $ 8,995 $ 6,905 $ 7,336 $ 704 $ 1,129 $ 449
3.08 3.17 2.95 2.95 2.95 2.98 3.05 2.71 (e)
3.64 3.24 3.23 3.48 3.51 3.54 3.12 2.99 (e)
.82 (.45) (.43) .86 (.20) .92 (.33) (.19)(e)
56 20 22 25 4 56 20 22
</TABLE>
- --------------------------------------------------------------------------------
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid indirectly, if any,
through an expense offset arrangement.
(e) Annualized
(f) Total return repre- sents aggregate total return and does not reflect a
sales charge.
23
<PAGE> 24
[IVY LEAF LOGO]
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY DEVELOPING NATIONS FUND ---------------------------------------------------------------------
for the period
November 1, 1994
for the year ended (Commencement)
December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 6.82 $ 10.12 $ 9.05 $ 8.64 $ 10.00
--------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a)....................... .06 .01 (.02) .01 --
Net gains or losses on securities (both realized
and unrealized)...................................... (.86) (2.80) 1.09 .54 (1.36)
--------------------------------------------------------------------
Total from investment operations....................... (.80) (2.79) 1.07 .55 (1.36)
--------------------------------------------------------------------
Less distributions
Dividends
From net investment income......................... -- -- -- .01 --
In excess of net investment income................. -- .01 -- -- --
Distributions
From capital gains................................. -- .30 -- .10 --
In excess of capital gains......................... -- .20 -- .03 --
--------------------------------------------------------------------
Total distributions.................................. -- .51 -- .14 --
--------------------------------------------------------------------
Net asset value, end of period........................... $ 6.02 $ 6.82 $ 10.12 $ 9.05 $ 8.64
====================================================================
Total return (%)......................................... (11.67)(c) (27.42)(c) 11.83(c) 6.40(c) (13.50)(f)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................. $ 5,487 $ 8,584 $ 9,925 $ 3,435 $ 611
Ratio of expenses to average net assets (d)
With expense reimbursement (%)......................... 2.18 2.31 2.45 2.55 2.20 (e)
Without expense reimbursement (%)...................... 3.47 2.39 2.82 7.18 20.74 (e)
Ratio of net investment income (loss) to average net
assets (%)(a).......................................... .88 .09 (.23) .24 .52 (e)
Portfolio turnover rate (%).............................. 47 42 27 14 --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY SOUTH AMERICA FUND ---------------------------------------------------------------------
for the period
November 1, 1994
for the year ended (Commencement)
December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1998 1997 1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 8.96 $ 8.51 $ 6.88 $ 8.37 $ 10.00
---------------------------------------------------------------------
Income (loss) from investment operations
Net investment (loss) (a).............................. .21 .06 .01 .01 --
Net gains or losses on securities (both realized
and unrealized)...................................... (3.44) .53 1.66 (1.45) (1.63)
--------------------------------------------------------------------
Total from investment operations....................... (3.23) .59 1.67 (1.44) (1.63)
--------------------------------------------------------------------
Less distributions
Dividends from net investment income................... -- .04 -- -- --
Distributions from capital gains....................... .15 .10 .04 -- --
Returns of capital..................................... -- -- -- .05 --
--------------------------------------------------------------------
Total distributions.................................. .15 .14 .04 .05 --
--------------------------------------------------------------------
Net asset value, end of period........................... $ 5.58 $ 8.96 $ 8.51 $ 6.88 $ 8.37
====================================================================
Total return (%)......................................... (36.07)(c) 7.03(c) 24.22(c) (17.28)(c) (16.10)(f)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................. $ 1,638 $ 5,671 $ 4,016 $ 2,015 $ 571
Ratio of expenses to average net assets (d)
With expense reimbursement (%)......................... 2.38 2.45 2.55 2.61 2.20 (e)
Without expense reimbursement (%)...................... 5.09 3.18 4.89 9.26 16.22 (e)
Ratio of net investment income (loss) to average net
assets (%)(a).......................................... 1.96 .65 .24 .22 .21 (e)
Portfolio turnover rate (%).............................. 26 10 20 45 82
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------------------------------------------------------------------
for the period for the period
November 1, 1994 April 30, 1996
for the year ended (Commencement) for the year ended (Commencement) to
December 31, to December 31, December 31, December 31,
---------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6.77 $ 10.04 $ 9.05 $ 8.64 $ 10.00 $ 6.79 $ 10.06 $ 9.89
---------------------------------------------------------------------------------------------------------------------
.01 (.06) (.06) (.02) -- .01 (.07) (.02)
(.85) (2.76) 1.05 .51 (1.36) (.84) (2.76) .19
---------------------------------------------------------------------------------------------------------------------
(.84) (2.82) .99 .49 (1.36) (.83) (2.83) .17
---------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
-- .01 -- -- -- -- .01 --
-- .28 -- .08 -- -- .27 --
-- .16 -- -- -- -- .16 --
---------------------------------------------------------------------------------------------------------------------
-- .45 -- .08 -- -- .44 --
---------------------------------------------------------------------------------------------------------------------
$ 5.93 $ 6.77 $ 10.04 $ 9.05 $ 8.64 $ 5.96 $ 6.79 $ 10.06
=====================================================================================================================
(12.35)(c) (27.93)(c) 10.95(c) 5.62(c) (13.60)(f) (12.16)(c) (28.01)(c) 1.73(f)
$ 6,145 $ 8,488 $ 6,269 $ 945 $ 121 $ 2,641 $ 2,420 $ 1,854
2.96 3.09 3.20 3.30 2.95(e) 2.96 3.12 3.16(e)
4.25 3.17 3.57 7.93 21.49(e) 4.25 3.20 3.53(e)
.10 (.69) (.98) (.51) (.23)(e) .10 (.72) (.94)(e)
47 42 27 14 -- 47 42 27
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
---------------------------------------------------------------------------------------------------------------------
for the period for the period
November 1, 1994 April 30, 1996
for the year ended (Commencement) for the year ended (Commencement) to
December 31, to December 31, December 31, December 31,
---------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8.94 $ 8.48 $ 6.88 $ 8.37 $ 10.00 $ 8.89 $ 8.46 $ 7.96
---------------------------------------------------------------------------------------------------------------------
.12 (.01) (.03) (.02) (.01) .12 (.02) (.02)
(3.39) .53 1.63 (1.47) (1.62) (3.38) .53 .55
---------------------------------------------------------------------------------------------------------------------
(3.27) .52 1.60 (1.49) (1.63) (3.26) .51 .53
---------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
.15 .06 -- -- -- .15 .08 .03
-- -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------
.15 .06 -- -- -- .15 .08 .03
---------------------------------------------------------------------------------------------------------------------
$ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37 $ 5.48 $ 8.89 $ 8.46
=====================================================================================================================
(36.59)(c) 6.18(c) 23.26(c) (17.90)(c) (16.20)(f) (36.69)(c) 6.06(c) 6.66 (f)
$ 972 $ 3,028 $ 2,025 $ 684 $ 122 $ 148 $ 453 $ 111
3.18 3.23 3.33 3.36 2.95(e) 3.21 3.30 3.46 (e)
5.89 3.96 5.67 10.01 16.97(e) 5.92 4.03 5.80 (e)
1.16 (.13) (.54) (.53) (.54)(e) 1.13 (.20) (.68)(e)
26 10 20 45 82 26 10 20
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid indirectly, if any,
through an expense offset arrangement.
(e) Annualized
(f) Total return represents aggregate total return and does not reflect a
sales charge.
25
<PAGE> 26
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
26
<PAGE> 27
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
27
<PAGE> 28
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
28
<PAGE> 29
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
_________________________________________________________________________
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
_________________________________________________________________________
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address__________________________________________________________________
City _________________________________________ State _______ Zip ________
Phone # (day) (___)_________________ Phone # (evening) (__)_____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence ______________
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): __________________
Social security # _____-____-_______ or Tax identification _____________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _________
Representative's name ___________________________________________________
Representative's # _________________ Representative's phone _____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) for $__________ made payable to
the appropriate fund. Please invest it in: _____ Class A ____ Class B
____ Class C _____ Class I shares ("--" Funds only) of the following
funds(s):
<TABLE>
<S> <C>
$ _____________ Ivy Asia Pacific Fund $ _____________ Ivy Developing Nations Fund
$ _____________ Ivy China Region Fund $ _____________ Ivy South America Fund
</TABLE>
B. I qualify for a reduction or elimination of the 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 the account(s) listed below.
Fund name: __________________ Fund name: ___________________
Account #:___________________ Account #:____________________
If establishing a Letter of Intent, you will need to purchase Class A
shares over a 13-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
C. FOR DEALER USE ONLY
Confirmed trade orders: _______________ ________________ __________
Confirm Number Number of Shares Trade Date
<PAGE> 30
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 the same class of a different Ivy fund account.
Fund name: ____________________________________________________
Account #: ____________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a
different Ivy fund account.
Fund name: ____________________________________________________
Account #: ____________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $_____ for each time period indicated below and invest my
bank proceeds into the following Ivy fund:
Fund name:____________________________________ ____________________
Share class: __ Class A __ Class B __ Class C
Account #: ________________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
___________________).
___ Semiannually (on the ___ day of the months of
____________ and _____________).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($50 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ______________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: ______________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___ Semiannually (on the _____ day of the months of
____________ and _____________).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional shares of the same class of a
different Ivy fund:
Fund name: ____________________________________________________
Account #: ____________________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _______________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City _____________________________ State ______________ Zip ______________
B. FED WIRE/EFT INFORMATION
Financial institution ____________________________________________________
ABA # ____________________________________________________________________
Account # ________________________________________________________________
Street ___________________________________________________________________
City _____________________________ State ______________ Zip _____________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
________________________________________ ______________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
DETACH ON PERFORATION TO MAIL
(Remember to sign Section 8)
<PAGE> 31
* Symbol not assigned as of this printing
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Asia Pacific Fund - Class A IAPAX 465897494
Ivy Asia Pacific Fund - Class B IAPBX 465897486
Ivy Asia Pacific Fund - Class C IAPCX 465897478
Ivy China Region Fund - Class A IVCRX 465897866
Ivy China Region Fund - Class B ICRBX 465897858
Ivy China Region Fund - Class C ICRCX 465897643
Ivy Developing Nations Fund - Class A IVCAX 465897841
Ivy Developing Nations Fund - Class B IVCBX 465897833
Ivy Developing Nations Fund - Class C IVCCX 465897569
Ivy South America Fund - Class A IVLAX 465897825
Ivy South America Fund - Class B IVSBX 465897817
Ivy South America Fund - Class C IVSCX 465897577
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
[IVY LEAF LOGO]
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and each Fund's annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Fund's performance during its most recent fiscal year. The SAI and
annual and semi annual reports are available upon request and without
charge from the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway,
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and semi
annual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 33
Ivy Funds Logo
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 EMERGING MARKET FUNDS ADVISOR CLASS SHARES
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS FUND
IVY SOUTH AMERICA FUND
Ivy Fund is a registered open-end investment company
consisting of nineteen separate portfolios. This Prospectus
relates to the Advisor Class shares of the four funds listed
above (the "Funds"). The Funds also offer Class A, Class B and
Class C shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the
contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are
not federally insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
-- CONTENTS
2 Ivy Asia Pacific Fund
4 Ivy China Region Fund
6 Ivy Developing Nations Fund
8 Ivy South America Fund
11 Additional information
about investment strategies
and risks
15 Management
16 Shareholder information
20 Financial Highlights
21 Account application
<TABLE>
<S> <C> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
Mackenzie Logo
<PAGE> 34
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
ASIA PACIFIC
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term growth. Consideration of
current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities issued in Asia
Pacific countries, which include China, Hong Kong, India, Indonesia, Malaysia,
Pakistan, the Philippines, Singapore, Sri Lanka, South Korea, Taiwan, Thailand
and Vietnam.
The Fund's management team uses a value strategy to identify companies and
markets that have solid long-term growth prospects and appear to be undervalued.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the securities markets of many Asia-Pacific
countries fall into this category, the Fund is exposed to the following
additional risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: Investing in the Asia-Pacific region involves special risks
beyond those described above. For example, certain Asia-Pacific countries may be
vulnerable to trade barriers and other protectionist measures that could have an
adverse effect on the value of the Fund's portfolio. The limited size of the
markets for some Asia-Pacific securities can also make them more susceptible to
investor perceptions which can impact their value and liquidity.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long term growth potential in
this sector of the world, but who can accept potentially dramatic fluctuations
in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 1, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
(CHART)
IVY ASIA PACIFIC FUND
---------------------
<S> <C>
'97 -39.585%
'98 -6.865%
</TABLE>
Best quarter Q4 '98: 43.90%
Worst quarter Q2 '98: (34.21%)
<TABLE>
<CAPTION>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
-------------------------------------------------------------------------------------------------
MSCI FAR LIPPER
EAST FREE ASIA PACIFIC
(EX-JAPAN) (EX-JAPAN)
CLASS A INDEX CATEGORY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Past year................................................... (6.86%) (7.39%) (9.05%)
Since inception............................................. (25.04%) (28.94%) (23.78%)
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)............................... none
Maximum deferred sales charge (load) (as a percentage of
purchase price)............................................. none
Maximum sales charge (load) imposed on reinvested
dividends................................................... none
Redemption fee*............................................... 2.00%**
Exchange fee.................................................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees............................. 1.00%
Distribution and/or service (12b-1)
fees...................................... none
Other expenses.............................. 4.28%
Total annual Fund operating expenses........ 5.28%
Expenses reimbursed*........................ 3.38%
Net Fund operating expenses*................ 1.90%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 193
3rd 710
5th 1,255
10th 2,742
</TABLE>
3
<PAGE> 36
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
CHINA REGION
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
companies that are located or have a substantial business presence in the China
Region, which includes China, Hong Kong, Taiwan, South Korea, Singapore,
Malaysia, Thailand, Indonesia and the Philippines.
The Fund may also invest in equity securities of companies whose current or
expected performance is considered to be strongly associated with the China
Region. A large portion of the Fund is likely to be invested in equity
securities of companies that trade in Hong Kong.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the securities markets of many China Region
countries fall into this category, the Fund may be exposed to one or more of the
following additional risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: Mainland China may be subject to a much higher degree of
economic, political and social instability than more developed countries, which
could at any time result in the disruption of its principal financial markets
(and to a lesser extent, those of other China Region countries). A number of
China Region countries also depend heavily on international trade, which makes
their securities markets particularly sensitive to the trade policies and
economic conditions of their principal trading partners.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential in
this sector of the world, but who can accept potentially dramatic fluctuations
in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
4
<PAGE> 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on October 22, 1993 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
(CHINA REGION FUND BAR GRAPH)
<TABLE>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
CHINA REGION FUND
-----------------
<S> <C> <C>
'94 -24.88%
'95 1.59%
'96 20.5%
'97 -21.94%
'98 -20.56%
</TABLE>
Best quarter Q4 '98: 25.48%
Worst quarter Q4 '97: (30.21%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------------------------------
LIPPER
CHINA HANG MSCI IFC
REGION SENG TAIWAN CHINA
CLASS A CATEGORY INDEX INDEX INDEX
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year................................................... (20.56%) (17.51%) (6.29%) (22.35%) --
Past 5 years................................................ (10.63%) (11.54%) (3.31%) 0.57% --
Since inception............................................. (7.71%) (8.05%) 2.77% 9.93% --
*Lipper performance is calculated from October 28, 1993.
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -------------------------------------------------------
<S> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price).................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price)............. none
Maximum sales charge (load) imposed on
reinvested dividends...................... none
Redemption fee*............................. 2.00%**
Exchange fee................................ none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees........................... 1.00%
Distribution and/or service (12b-1)
fees...................................... none
Other expenses............................ 2.38%
Total annual Fund operating expenses...... 3.38%
Expenses reimbursed*...................... 0.56%
Net Fund operating expenses*.............. 2.82%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 285
3rd 984
5th 1,706
10th 3,617
</TABLE>
5
<PAGE> 38
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
DEVELOPING
NATIONS FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term growth. Consideration of
current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
companies that are located in, or are expected to profit from, countries whose
markets are generally considered to be "developing" or "emerging".
The Fund may invest more than 25% of its assets in a single country, but usually
will hold securities from at least three emerging market countries in its
portfolio.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies. Since the Fund normally invests a substantial portion of
its assets in these countries, it is exposed to the following additional risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential in
the developing nations sector, but who can accept potentially dramatic
fluctuations in capital value in the short-term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on November 1, 1994 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
(DEVELOPING NATIONS FUND BAR GRAPH)
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
IVY EMERGING MARKETS - CLASS A
SHARES
------------------------------
<S> <C> <C>
'95 6.4%
'96 11.83%
'97 -27.42%
'98 -11.67%
</TABLE>
Best quarter: Q4 '98: 29.00%
Worst quarter: Q4 '97: (27.28%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
-----------------------------------------------------------------------------------------------------------
MSCI IFC MORNINGSTAR
EMERGING EMERGING EMERGING
MARKETS MARKETS MARKETS
CLASS A FREE INDEX INDEX UNIVERSE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................................... (11.67%) (25.34%) (21.09%) (26.82%)
Since inception............................................. (9.49%) (12.30%) (12.35%) (9.09%)
</TABLE>
- -- FEES AND EXPENSES:
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
<TABLE>
fees paid directly from
SHAREHOLDER FEES your investment
- -------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)............................... none
Maximum deferred sales charge (load) (as a percentage of
purchase price)............................................. none
Maximum sales charge (load) imposed on reinvested
dividends................................................... none
Redemption fee*............................................... 2.00%**
Exchange fee.................................................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 1.97%
Total annual Fund operating expenses..... 2.97%
Expenses reimbursed*..................... 1.29%
Net Fund operating expenses*............. 1.68%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 171
3rd 644
5th 1,145
10th 2,522
</TABLE>
7
<PAGE> 40
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
SOUTH AMERICA
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal objective is long-term growth. Consideration of current
income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities and government
and corporate debt securities issued throughout South America, Central America
and the Spanish-speaking islands of the Caribbean.
The Fund is likely to have significant investments in Argentina, Brazil, Chile,
Colombia, Peru and Venezuela.
The Fund may invest in low rated debt securities to increase its potential
yield.
The Fund's management team uses a value approach to find stocks it believes are
undervalued relative to their long-term growth prospects or underlying asset
values.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Many of the Fund's debt security
holdings may be considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). Low-rated debt securities are considered speculative
and could significantly weaken the Fund's returns if the issuer defaults on its
payment obligations.
NON-DIVERSIFICATION RISK: The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, and may therefore invest a greater percentage of
its assets in a particular issuer than a "diversified" fund. As a result, the
Fund may also be more susceptible than a diversified fund to the price movements
of certain securities it holds in its portfolio.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies, which characterizes many of the countries in which the
Fund may invest. As a result, the Fund is exposed to the following additional
risks:
- - securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of
8
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
businesses, restrictions on foreign ownership or prohibitions against
repatriation of assets);
- - abrupt changes in exchange-rate regime or monetary policy;
- - unusually large currency fluctuations and currency-conversion costs; and
- - high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
REGIONAL RISK: The securities markets of certain Latin American countries are
substantially smaller, less developed, less liquid and more volatile than major
securities markets elsewhere in the world. For example, the limited market size
for a number of the Fund's portfolio holdings makes their prices vulnerable to
investor perceptions and traders who control large positions. Some Latin
American countries have also experienced unusually high inflation rates.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long term growth potential in
this sector of the world, but who can accept potentially dramatic fluctuations
in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
9
<PAGE> 42
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on November 1, 1994 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
(SOUTH AMERICA FUND BAR GRAPH)
<TABLE>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
SOUTH AMERICA FUND
------------------
<S> <C> <C>
'95 -17.28%
'96 24.22%
'97 7.03%
'98 -36.07%
</TABLE>
Best quarter Q2 '96: 14.34%
Worst quarter Q3 '98: (30.26%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
-------------------------------------------------------------------------------------------------------
MSCI EMF
LATIN MSCI MSCI
AMERICA BRAZIL ARGENTINA
CLASS A INDEX INDEX INDEX
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................................... (36.07%) (35.11%) (44.07%) (27.30%)
Since inception............................................. (11.90%) (6.61%) (8.88%) (2.00%)
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
<S> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price).................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price)............. none
Maximum sales charge (load) imposed on
reinvested dividends...................... none
Redemption fee*............................. 2.00%**
Exchange fee................................ none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Deducted from net proceeds on shares redeemed (or exchanged)
within one month after purchase. This fee is retained by the Fund.
<TABLE>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
<S> <C> <C>
Management fees............................ 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses............................. 3.64%
Total annual Fund operating expenses....... 4.64%
Expenses reimbursed*....................... 2.71%
Net Fund operating expenses*............... 1.93%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 196
3rd 720
5th 1,271
10th 2,775
</TABLE>
10
<PAGE> 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY ASIA PACIFIC FUND: The Fund seeks to achieve its investment objective of
long-term growth by investing primarily in securities issued in countries
throughout the Asia-Pacific region, which includes China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, South
Korea, Taiwan, Thailand and Vietnam. The Fund usually invests in at least three
different countries, and does not intend to concentrate its investments in any
particular industry.
IVY CHINA REGION FUND: The Fund seeks to achieve its investment objective of
long-term capital growth primarily by investing in the equity securities of
companies that are expected to profit from the economic development and growth
of the China Region through a direct business connection (such as an exchange
listing or significant profit base) in one or more China Region countries. The
Fund may invest more than 25% of its assets in the securities of issuers in a
single China Region country, and could have significantly more than 50% of its
assets invested in Hong Kong. The Fund expects to invest the balance of its
assets in the equity securities of companies whose current or expected
performance is considered to be strongly associated with the China Region. The
Fund's management team seeks to reduce risk by focusing on companies with strong
foreign joint venture partners, well-positioned consumer franchises or
monopolies, or that operate in strategic or protected industries.
IVY DEVELOPING NATIONS FUND: The Fund seeks to achieve its principal objective
of long-term capital growth by investing primarily in the equity securities of
companies that the Fund's manager believes will benefit from the economic
development and growth of emerging markets. The Fund considers an emerging
market country to be one that is generally viewed as "developing" or "emerging"
by the World Bank, the International Finance Corporation or the United Nations.
The Fund usually invests its assets in at least three different emerging market
countries, and may invest at least 25% of its assets in the securities of
issuers located in a single country.
IVY SOUTH AMERICA FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the securities markets of
South America, Mexico and Central America. The Fund normally invests its assets
in at least three different countries, and expects to focus its investments in
Argentina, Brazil, Chile, Colombia, Peru and Venezuela. The Fund's holdings are
concentrated in high-quality companies, selected for both their defensive
strengths and long-term prospects.
The Fund does not expect to concentrate its investments in any particular
industry. The Fund may, however, invest more than 5% of a portion of its assets
in a single issuer (see "Non-diversification risk", on page 8).
ALL FUNDS: The countries in which each Fund invests are selected on the basis of
a mix of factors that include long-term economic growth prospects, anticipated
inflation levels, and the effect of applicable government policies on local
business conditions. The Funds are managed using a value approach, which focuses
on financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well
11
<PAGE> 44
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
as anticipated, and you could therefore lose money by investing in a Fund
depending upon the timing of your initial purchase and any subsequent
redemption.
OTHER RISKS: Since the Funds are likely to invest heavily in countries with
economies or securities markets that are relatively undeveloped, each Fund is
more susceptible to the risks associated with these types of securities than
funds that invest primarily in more established markets. Following is a
description of these risks, along with the risks commonly associated with the
other securities and investment techniques that the Funds' adviser considers
important in achieving each Fund's investment objective or in managing its
exposure to risk (and that could therefore have a significant effect on a Fund's
returns). Other investment methods that the Funds may use (such as derivative
investments), but that do not play a key role in their overall investment
strategies, are described in the Funds' Statement of Additional Information (see
back cover page for information on how you can receive a free copy).
- - COMMON STOCKS: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - DEBT SECURITIES: The Funds may invest in debt securities, and Ivy South
America Fund may at any given time have a significant portion of its assets
invested in such instruments. The value of debt securities rises and falls
inversely with fluctuations in interest rates. For example, 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. A
Fund's portfolio is therefore susceptible to losses in a rising interest rate
environment. The market value of debt securities also tends to vary according
to the relative financial condition of the issuer. Bonds with longer
maturities tend to be more volatile than bonds with shorter maturities.
A Fund may invest a portion of its assets in low-rated debt securities
(sometimes referred to as "high yield" or "junk" bonds). In general, low-
rated debt securities 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. For this reason, these
bonds are considered speculative and could significantly weaken the Fund's
returns.
Ivy South America Fund may have significant holdings in sovereign debt. For a
variety of reasons (such as cash flow problems, limited foreign reserves, and
political constraints), the governmental entity that controls the repayment of
sovereign debt may not be able or willing to repay the principal or interest
when due. A governmental entity's ability to honor its debt obligations to the
Fund may also be contingent on its receipt from others (such as the
International Monetary Fund and more solvent foreign governments) of specific
disbursements, which may in turn be conditioned on the perceived health of the
governmental entity's economy and/or its implementation of economic reforms.
If any of these conditions fail, the Fund could lose the entire value of its
investment for an indefinite period of time.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect each Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets. Many of the Funds' securities also are
denominated in foreign currencies and the value of each Fund's investments, as
measured in U.S. dollars, may be affected favorably or unfavorably by changes
in foreign currency exchange rates and exchange control regulations. Currency
conversions can also be costly.
12
<PAGE> 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other factors that can affect the value of a Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that
many foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards. It may also be difficult to obtain reliable
information about the securities and business operations of certain foreign
issuers. Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
- securities that are even less liquid and more volatile than those in
more-developed foreign countries;
- less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- increased settlement delays;
- unusually high inflation rates (which in extreme cases can cause the value
of a country's assets to erode sharply);
- unusually large currency fluctuations and currency-conversion costs; and
- high national-debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DEPOSITORY RECEIPTS: Each Fund may acquire interests in foreign issuers in the
form of sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs") and similar types of depository receipts. ADRs
typically are issued by a U.S. bank or trust company and represent ownership
of the underlying securities issued by a foreign corporation. GDRs and other
types of depository receipts are usually issued by foreign banks or trust
companies. Each Fund's investments in ADRs, GDRs and other depository receipts
are viewed as investments in the underlying securities.
Depository receipts can be difficult to price and are not always
exchange-listed. Unsponsored depository programs also are organized
independently 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.
- - FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND FORWARD FOREIGN CURRENCY CONTRACTS:
A Fund may, but is not required to, use foreign currency exchange transactions
and forward foreign currency contracts to hedge certain market risks (such as
interest rates, currency exchange rates and broad or specific market
movement). These investment techniques involve a number of risks, including
the possibility of default by the counterparty to the transaction and, to the
extent the adviser's judgment as to certain market movements is incorrect, the
risk of losses that are greater than if the investment technique had not been
used. For example, there may be an imperfect correlation between a Fund's
portfolio holdings of securities denominated in a particular currency and the
forward contracts entered into by the 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. In addition, although the use of these
investment techniques for hedging purposes should tend to minimize the risk of
loss due to a decline in the value of the hedged position, they also tend to
limit any potential gain that might result from an increase in the position's
value.
- - ILLIQUID SECURITIES: Each Fund may invest up to 15% of its net assets in
"illiquid securities," which are assets that may not be disposed of in the
ordinary course of business within seven days at roughly the value at which
the Fund has valued the assets. Some of these may be "restricted securities,"
which cannot be sold to the public without registration under the Securities
Act of 1933 (in the absence of an exemption) or
13
<PAGE> 46
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
because of other legal or contractual restrictions on resale. Thus, while
illiquid securities may offer the potential for higher returns than more
readily marketable securities, there is a risk that a Fund will not be able to
dispose of them promptly at an acceptable price.
- - OTHER INVESTMENT COMPANIES: Each Fund may invest up to 10% of its total assets
in the shares of other investment companies. As a shareholder of an investment
company, a Fund would bear its ratable share of the fund's expenses (which
often include an asset-based management fee). A Fund could also lose money by
investing in other investment companies, since the value of their respective
investments and the income they generate will vary daily based on prevailing
market conditions.
- - TEMPORARY DEFENSIVE POSITIONS: Each Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective.
- - BORROWING: For temporary or emergency purposes, Ivy China Region Fund may
borrow up to 10% of the value of its total assets from qualified banks. Ivy
Asia Pacific Fund, Ivy Developing Nations Fund and Ivy South America Fund may
borrow up to one-third of the value of its total assets from qualified banks,
but will not buy securities whenever its outstanding borrowings exceed 10% of
the value of its total assets. Borrowing may exaggerate the effect on a Fund's
share value of any increase or decrease in the value of the securities it
holds. Money borrowed will also be subject to interest costs.
- -- OTHER IMPORTANT INFORMATION
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
14
<PAGE> 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other fifteen series of Ivy
Fund. For the Funds' fiscal year ending December 31, 1998, the Funds each paid
IMI a fee that was equal to 1.00% of the Funds' respective average net assets.
- -- PORTFOLIO MANAGEMENT
Each Fund is managed by a team of investment professionals that is supported by
research analysts who acquire information on regional and country-specific
economic and political developments and monitor individual companies. These
analysts use a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third-party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
15
<PAGE> 48
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value next determined after your instructions are received in
proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's transfer agent)
or by your registered securities dealer. Since the Funds normally invest in
securities that are listed on foreign exchanges that may trade on weekends or
other days when the Funds do not price their shares, each Fund's share value may
change on days when shareholders will not be able to purchase or redeem the
Fund's shares.
- -- HOW TO BUY SHARES
Please read these sections below carefully before investing.
Advisor Class shares are offered through this Prospectus only to the following
investors:
- - trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- - 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 his
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;
- - officers and Trustees of the Ivy Fund (and their relatives);
- - directors or employees of Mackenzie Investment Management Inc. or its
affiliates;
- - 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.)
The following investment minimums, sales charges and expenses apply.
<TABLE>
<S> <C>
- ---------------------------------------------------
Minimum initial investment*............... $10,000
Minimum subsequent investment*............ $250
Initial sales charge...................... None
CDSC...................................... None
Service and distribution fees............. None
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this
16
<PAGE> 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prospectus. Enclose a check payable to the Fund in which you wish to invest. You
should note on the check that you wish to purchase Advisor Class shares (see
page 16 for minimum initial investments.) Deliver your application materials to
your registered representative or selling broker, or send them to one of the
addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
on this page. Be sure that all registered owners listed on the account sign
the request. Medallion signature guarantees and supporting legal documentation
may be required. When you redeem, IMSC will normally send redemption proceeds
to you on the next business day, but may take up to seven days (or longer in
the case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the
17
<PAGE> 50
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
EMERGING MARKET FUNDS
- --------------------------------------------------------------------------------
current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
REDEMPTION FEE: The Funds can experience substantial price fluctuations and are
intended for long-term investors. Redemption fees for the Funds are intended to
encourage long-term investment, to avoid transaction and other expenses caused
by early redemptions, and to facilitate portfolio management. This fee may be
waived at the discretion of IMSC. Effective June 1, 1999, the Funds may charge a
2.00% fee for redemptions or exchanges within one month of the date of purchase.
This fee is not a CDSC, is not a commission, and does not benefit IMI or IMSC in
any way. The redemption fee will be assessed on the net asset value of the
shares redeemed or exchanged and will be deducted from the redemption proceeds
otherwise payable to the shareholder. Each Fund will retain the fee charged.
IMPORTANT REDEMPTION INFORMATION:
- - A redemption fee will be charged on the asset value of shares redeemed within
one month of purchase.
- - 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, unless you instruct otherwise.
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 17 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Fund may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee or cancel a shareholder's exchange privilege if at any time it
appears that such market-timing strategies are being used. For example,
shareholders exchanging more than five times in a 12-month period may be
considered to be using market-timing strategies. An exchange fee will be
charged on the asset value of shares exchanged within one month of purchase.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a
18
<PAGE> 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will be mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends annually. The Funds will distribute net investment
income and net realized capital gains, if any, at least once a year. The Funds
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 Internal Revenue Code of 1986,
as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by a Fund during January of the
following calendar year. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by your
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Fund
under applicable state or local law.
19
<PAGE> 52
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance and reflects results for a single Fund share.
Ivy Asia Pacific Fund and Ivy South America Fund had no Advisor Class
shares outstanding at December 31, 1998, and accordingly, no financial
information is presented. The total returns in the table represent the rate
an investor would have earned (or lost) on an investment in a Fund
(assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with each Fund's financial statements, is included in its Annual
Report to shareholders (which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
February 10, 1998
(Commencement)
to December 31,
IVY CHINA REGION FUND 1998
- -----------------------------------------------------------------------
<S> <C>
ADVISOR CLASS
SELECTED PER SHARE DATA -----------------
Net asset value, beginning of period............ $ 7.89
-----------------
Loss from investment operations
Net investment income(a)...................... .08
Net gains or losses on securities (both
realized and unrealized).................... (1.62)
-----------------
Total from investment operations.............. (1.54)
-----------------
Less distributions
Dividends (from net investment income)........ .08
-----------------
Total distributions......................... .08
-----------------
Net asset value, end of period.................. $ 6.27
=================
Total return (%)(b)............................. (19.56)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $ 10
Ratio of expenses to average net assets(c)
With expense reimbursement (%)(d)............. 2.92
Without expense reimbursement (%)(d).......... 3.48
Ratio of net investment income to average net
assets (%)(a)(d).............................. .98
Portfolio turnover rate (%)..................... 56
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(d) Annualized
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
April 30, 1998
(COMMENCEMENT)
IVY DEVELOPING TO DECEMBER 31,
NATIONS FUND 1998
- ---------------------------------------------------------------------
ADVISOR CLASS
SELECTED PER SHARE DATA ---------------
<S> <C>
Net asset value, beginning of period............ $ 7.48
---------------
Loss from investment operations
Net investment income(a)...................... .04
Net gains or losses on securities (both
realized and unrealized).................... (1.47)
---------------
Total from investment operations.............. (1.43)
---------------
Net asset value, end of period.................. $ 6.05
===============
Total return (%)(b)............................. (19.06)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $ 82
Ratio of expenses to average net assets(c)
With expense reimbursement (%)(d)............. 1.68
Without expense reimbursement (%)(d).......... 2.97
Ratio of net investment income to average net
assets (%)(a)(d).............................. 1.38
Portfolio turnover rate (%)..................... 47
</TABLE>
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(d) Annualized
20
<PAGE> 53
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to: USE FOR ADVISOR
Ivy Mackenzie Services Corp., CLASS ONLY
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address _________________________________________________________________
City _______________________________________ State ________ Zip _________
Phone # (day) (____)___________________ Phone # (evening) (____)_________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust _________________________ Minor's state of residence ____
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): ________________
Social security # ____- __- ____ or Tax identification # ___________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 ________
Representative's name __________________________________________________
Representative's # ____________ Representative's phone # ______________
Authorized signature of dealer ________________________________________
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for $ __________ made payable
to the appropriate fund. Please invest it in Advisor Class shares of
the following fund(s):
<TABLE>
<S> <C>
$ _____________ Ivy Asia Pacific Fund $ ______________ Ivy Developing Nations Fund
$ _____________ Ivy China Region Fund $ ______________ Ivy South America Fund
</TABLE>
B. FOR DEALER USE ONLY
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: _______________ __________________ __________________
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 54
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 account.
Fund name: _______________________________________________________
Account #: _______________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares in this account or a different Ivy fund
account.
Fund name: _______________________________________________________
Account #: _______________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $________ for each time period indicated below and invest my
bank proceeds in Advisor Class shares of the following Ivy fund:
Fund name: _______________________________________________________
Account #: _______________________________________________________
2. Debit my bank account:
_____ Annually (on the _____ day of the month of
___________________________________).
_____ Semiannually (on the _____ day of the months of
________ and __________).
_____ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
_____ Monthly*_____ once per month on the _____ day
_____ twice per month on the _____ days
_____ 3 times per month on the _____ days
_____ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
_____ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($250 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ______________________________________________________
Account #: ______________________________________________________
2. Withdraw from my Ivy Fund account:
_____ Annually (on the _____ day of the month of
_______________).
_____ Semiannually (on the _____ day of the months of
_______________ and _______________).
_____ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
_____ Monthly*_____ once per month on the _____ day
_____ twice per month on the _____ days
_____ 3 times per month on the _____ days
_____ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
_____ sent to the address listed in the registration
_____ sent to the special payee listed in section 7A or 7B.
_____ invested into additional Advisor Class shares of a
different Ivy Fund:
Fund name: ______________________________________________________
Account #: ______________________________________________________
Note: A minimum balance of $10,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** _____ yes _____ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** _____ yes _____ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _______________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City _________________________________________ State _____ Zip ___________
B. FED WIRE/EFT INFORMATION
Financial institution ____________________________________________________
ABA # ____________________________________________________________________
Account # ________________________________________________________________
Street ___________________________________________________________________
City _________________________________________ State _____ Zip ___________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
_________________________________________ ____________________
Signature of Owner, Custodian, Trustee or Date
Corporate Officer
(Remember to sign Section 8)
<PAGE> 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Asia Pacific Fund Advisor Class * 465897312
Ivy China Region Fund Advisor Class * 465897270
Ivy Developing Nations Fund Advisor Class * 465897163
Ivy South America Fund Advisor Class * 465897171
- ----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing
<PAGE> 56
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and each Fund's annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Fund's performance during its most recent fiscal year. The SAI and
annual and semiannual reports are available upon request and without
charge from the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 1.800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 57
Ivy Funds Logo
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 IVY INTERNATIONAL EQUITY FUNDS
IVY EUROPEAN OPPORTUNITIES 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 Fund is a registered open-end investment company consisting of
nineteen separate portfolios. This Prospectus relates to the Class A,
Class B and Class C shares of the seven funds listed above (the "Funds"),
and the Class I shares of Ivy European Opportunities Fund, Ivy Global
Science & Technology Fund, Ivy International Fund II and Ivy
International Small Companies Fund. The Funds also offer Advisor Class
shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this
Prospectus. Any representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- -- CONTENTS
2 Ivy European Opportunities Fund
4 Ivy Global Fund
6 Ivy Global Natural Resources Fund
8 Ivy Global Science &
Technology Fund
10 Ivy International Fund II
12 Ivy International Small
Companies Fund
14 Ivy Pan-Europe Fund
16 Additional Information
about investment strategies
and risks
20 Management
22 Shareholder information
30 Financial highlights
37 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[Mackenzie Logo]
<PAGE> 58
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
- -------------------------------
IVY EUROPEAN
OPPORTUNITIES FUND
- -- INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital growth by investing in the
securities markets of Europe.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the equity
securities of European companies, which may include:
- - companies operating in Europe's emerging markets;
- - small-capitalization companies in the more developed markets of Europe; and
- - large European companies, or European companies of any size that provide
special investment opportunities (such as privatized companies or those
providing exceptional value).
The fund may also invest in European debt securities, up to 20% of which may be
low-rated (commonly referred to as "high yield" or "junk" bonds).
The Fund's manager uses a "bottom-up" investment approach, focusing on prospects
for long term earnings growth.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger, more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction costs
in smaller-company stocks may also be higher than those of larger companies.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment, even where "management risk" is
not a factor.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Certain of the Fund's debt
security holdings may be considered below investment grade (commonly referred to
as "high yield" or "junk" bonds). Low-rated debt securities are considered
speculative and could weaken the Fund's returns if the issuer defaults on its
payment obligations.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
EURO CONVERSION RISK: On January 1, 1999, a new European currency called the
"euro" was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from January
1, 1999 through December 31, 2001, at which time euro
(GLOBE ARTWORK)
2
(GLOBE ARTWORK)
<PAGE> 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
bills and coins will be put into circulation. Certain European Union members,
including the United Kingdom, did not officially implement the euro on January
1, 1999 and may cause market disruptions when and if they decide to do so.
Should this occur, the Fund could experience investment losses.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
- -- PERFORMANCE INFORMATION
The Fund commenced operations on May 3, 1999, therefore no information is
available.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- ------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a percentage
of offering price)........ 5.75% none none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price).................... none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends...... none none none none
Redemption fee*........... none none none none
Exchange fee.............. none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees........... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees...... 0.25% 1.00% 1.00% none
Other expenses............ 0.95% 0.95% 0.95% 0.86%
Total annual Fund
operating expenses*....... 2.20% 2.95% 2.95% 1.86%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods (with additional
information shown for Class B and Class C shares based on the assumption that
you do not redeem your shares at that time). The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 785 $ 798 $ 298 $ 398 $ 298 $189
3rd 1,330 1,323 1,023 1,023 1,023 699
</TABLE>
3
<PAGE> 60
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
- -------------------------------
IVY
GLOBAL
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth. Any income realized will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
companies in at least three different countries, including the United States.
The Fund might engage in foreign currency exchange transactions and forward
foreign currency contracts to control its exposure to certain risks.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world. The Fund is expected to have some
emerging markets exposure in an attempt to achieve higher returns over the long
term.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
Since the Fund may invest a substantial portion of its assets in these
countries, it is exposed to the following additional risks:
- - securities that are even less liquid and more volatile than those in more
developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange rate regime or monetary policy;
- - unusually large currency fluctuations and currency conversion costs; and
- - high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
4
(GLOBE ARTWORK)
<PAGE> 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and how the Fund's average annual returns since its inception on
April 18, 1991 compare with those of a broad measure of market performance. The
Fund's past performance is not an indication of how the Fund will perform in the
future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------------------
[CHART]
CLASS A SHARES
--------------
<S> <C>
'92' 2.74
'93' 29.63
'94' -4.6
'95' 12.08
'96' 16.21
'97' -8.72
'98' 8.59
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 24.15%
Worst quarter Q3 '98: (20.47%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
------------------------------------------------------------------------------
MSCI
-------------------------
WORLD EAFE EMF
CLASS A CLASS B CLASS C INDEX INDEX INDEX
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Past year............ 2.35% 2.69% 6.30% 24.34% 20.00% (25.34%)
Past 5 years......... 3.03% n/a n/a 15.68% 9.19% (9.27%)
Since inception:
Class A*............. 6.78% n/a n/a 13.03% 8.44% 5.10%
Class B**............ n/a 4.11% n/a 16.43% 8.91% (7.91%)
Class C***........... n/a n/a (0.06%) 17.37% 7.84% (15.71%)
</TABLE>
# Performance figures reflect any applicable sales charges.
* The inception date for the Fund's Class A shares was April 18, 1991.
Index performance is calculated from April 30, 1991.
** The inception date for the Fund's Class B shares was April 1, 1994.
*** The inception date for the Fund's Class C shares was April 30, 1996.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................... 5.75% none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)................... none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none
Redemption fee*.......... none none none
Exchange fee............. none none none
* If you choose to receive your redemption proceeds
via Federal Funds wire, a $10 wire fee will be
charged to your account.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees*....... 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 1.29% 1.33% 1.66%
Total annual Fund
operating expenses..... 2.54% 3.33% 3.66%
Expenses
reimbursed**........... 0.36% 0.36% 0.36%
Net Fund operating
expenses**............. 2.18% 2.97% 3.30%
</TABLE>
*Management fees are reduced to 0.75% for net assets over $500
million.
**The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 783 $ 800 $ 300 $ 433 $ 333
3rd 1,325 1,329 1,029 1,125 1,125
5th 1,891 1,980 1,780 1,935 1,935
10th 3,422 3,579 3,579 4,044 4,044
</TABLE>
5
<PAGE> 62
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY GLOBAL
NATURAL RESOURCES FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth. Any income realized will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in equity securities.
The Fund's manager seeks to maximize the Fund's returns by seeking out natural
resources companies of any size with strong management and financial positions,
adding balance with established low cost, low debt producers and positions that
are based on anticipated commodity price trends. For these purposes, "natural
resources" generally include:
- - precious metals (such as gold, silver and platinum);
- - ferrous and nonferrous metals (such as iron, aluminum, copper and steel);
- - strategic metals (such as uranium and titanium);
- - fossil fuels and chemicals;
- - forest products and agricultural commodities; and
- - undeveloped real property.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger, more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction costs
in smaller company stocks may also be higher than those of larger companies.
NATURAL RESOURCES AND PHYSICAL COMMODITIES RISK: Investing in natural resources
can be riskier than other types of investment activities because of a range of
factors, including:
- - price fluctuations caused by real and perceived inflationary trends and
political developments; and
- - the costs assumed by natural resource companies in complying with
environmental and safety regulations.
Investing in physical commodities, such as gold, exposes the Fund to other risk
considerations, such as:
- - potentially severe price fluctuations over short periods of time;
- - storage costs that can exceed the custodial and/or brokerage costs associated
with the Fund's other portfolio holdings.
INDUSTRY-CONCENTRATION RISK: Since the Fund can invest a significant portion of
its assets in securities of companies engaged in natural resources activities,
the Fund could experience wider fluctuations in value than funds with more
diversified portfolios.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept potentially dramatic fluctuations in capital value in the
short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and how the Fund's average annual returns since its inception on
January 1, 1997 compare with those of a broad measure of market performance. The
Fund's past performance is not an indication of how the Fund will perform in the
future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
CLASS A SHARES
--------------
<S> <C>
'97' 6.95
'98' -29.35
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q3 '97: 19.66%
Worst quarter Q4 '97: (23.28%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
-----------------------------------------------------------
MSCI
COMMODITY-
RELATED
CLASS A CLASS B CLASS C INDEX
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ (33.41%) (33.33%) (31.19%) (14.61%)
Since inception*..... (15.68%) (15.45%) (14.17%) (9.65%)
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for all Classes was January 1, 1997.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................... 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)................... none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none
Redemption fee*.......... none none none
Exchange fee............. none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees........ 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 4.50% 4.43% 5.10%
Total annual Fund
operating expenses..... 5.75% 6.43% 7.10%
Expenses reimbursed*... 3.53% 3.53% 3.53%
Net Fund
operating expenses*.... 2.22% 2.90% 3.57%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 787 $ 793 $ 293 $ 460 $ 360
3rd 1,336 1,308 1,008 1,203 1,203
5th 1,909 1,946 1,746 2,061 2,061
10th 3,459 3,541 3,541 4,273 4,273
</TABLE>
7
<PAGE> 64
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY GLOBAL SCIENCE &
TECHNOLOGY FUND
- -- INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital growth. Any income realized
will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in equity securities
of companies throughout the world that are expected to profit from the
development, advancement and use of science and technology.
Industries that are likely to be represented in the Fund's portfolio holdings
include:
- - internet;
- - computers and peripheral products;
- - software;
- - electronic components and systems; and
- - telecommunications, media and information services.
The Fund's management team believes that technology is a fertile growth area,
and actively seeks to position the Fund to benefit from this growth by investing
in companies of any size that may deliver rapid earnings growth and potentially
high investment returns.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Many of the companies in which the Fund may
invest have 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, since smaller companies tend
to be thinly traded and because they are subject to greater business risk.
Transaction costs in smaller-company stocks may also be higher than those of
larger companies.
INDUSTRY-CONCENTRATION RISK: Since the Fund focuses its investments in
securities of companies engaged in the science and technology industries, the
Fund could experience wider fluctuations in value than funds with more
diversified portfolios. For example, rapid advances in these industries tend to
cause existing products to become obsolete, and the Fund's returns could suffer
to the extent it holds an affected company's shares. Companies in a number of
science and technology industries are also subject to government regulations and
approval processes that may affect their overall profitability and cause their
stock prices to be more volatile.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
8
<PAGE> 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on July 22, 1996 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
CLASS A SHARES
--------------
<S> <C>
'97 9.00
'98 35.26
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 39.16%
Worst quarter Q1 '97: (19.15%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
--------------------------------------------------------------------------
RUSSELL 2000
TECHNOLOGY
CLASS A CLASS B CLASS C CLASS I** INDEX
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 27.48% 29.20% 33.37% n/a 20.57%
Since inception*..... 38.96% 40.78% 41.64% n/a 15.12%
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for all Classes was July 22, 1996. Index performance
is calculated from July 30, 1996.
**The Fund has had no outstanding Class I shares.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- ------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price)...... 5.75% none none none
Maximum deferred
sales charge (load)
(as a percentage of
purchase price)...... none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested
dividends............ none none none none
Redemption
fee*................. none none none none
Exchange fee......... none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees...... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1)
fees................. 0.25% 1.00% 1.00% none
Other expenses....... 0.91% 0.95% 0.84% 0.82%
Total annual Fund
operating expenses... 2.16% 2.95% 2.84% 1.82%
</TABLE>
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 781 $ 798 $ 298 $ 387 $ 287 $ 185
3rd 1,212 1,213 913 880 880 573
5th 1,668 1,752 1,552 1,499 1,499 985
10th 2,925 3,085 3,085 3,166 3,166 2,137
</TABLE>
9
<PAGE> 66
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
FUND II
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in equity securities principally
traded in European, Pacific Basin and Latin American markets.
To control its exposure to certain risks, the Fund might engage in foreign
currency exchange transactions and forward foreign currency contracts.
The Fund's manager uses a disciplined value approach while looking for
investment opportunities around the world.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
10
<PAGE> 67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on May 13, 1997 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
(CHART)
CLASS A SHARES
--------------
<S> <C>
'98 6.63
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 16.49%
Worst quarter Q3 '98: (18.29%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
-------------------------------------------------------------------------------------------------
MORNINGSTAR LIPPER
MSCI CATEGORY CATEGORY
EAFE FOR INTL FOR INTL
CLASS A CLASS B CLASS C CLASS I** INDEX STOCK FUNDS STOCK FUNDS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Past year............ 0.50% 0.84% 4.79% n/a 20.00% 12.26% 13.02%
Since Inception*..... (6.12%) (5.81%) (3.48%) n/a 9.40% 5.88% 6.43%
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for all Classes was May 13, 1997. MSCI EAFE Index
performance is calculated from May 30, 1997. Morningstar performance
calculated from June 1, 1997. Lipper performance calculated from May 15,
1997.
**The Fund has had no outstanding Class I shares.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................. 5.75% none none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)................. none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends... none none none none
Redemption fee*........ none none none none
Exchange fee........... none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees......... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees.... 0.25% 1.00% 1.00% none
Other expenses.......... 0.63% 0.63% 0.66% 0.54%
Total annual Fund
operating expenses...... 1.88% 2.63% 2.66% 1.54%
Expenses reimbursed*.... 0.14% 0.14% 0.14% 0.14%
Net Fund operating
expenses*............... 1.74% 2.49% 2.52% 1.40%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.50% of the Fund's
average net assets (excluding 12b-1 fees, and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods (with additional
information shown for Class B and Class C shares based on the assumption that
you do not redeem your shares at that time). The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 742 $ 752 $ 252 $ 355 $ 255 $ 143
3rd 1,287 1,278 978 987 987 653
5th 1,857 1,927 1,727 1,741 1,741 1,190
10th 3,400 3,531 3,531 3,726 3,726 2,660
</TABLE>
11
<PAGE> 68
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL SMALL
COMPANIES FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth. Consideration of current income is secondary to
this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the common stock of foreign
issuers having total market capitalization of less than $1 billion.
The Fund might engage in foreign currency exchange transactions and forward
foreign currency contracts to control its exposure to certain risks.
The Fund is managed by a team that focuses on both value and growth factors.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL COMPANY RISK: Securities of smaller companies may be subject to more
abrupt or erratic market movements than the securities of larger, more
established companies, since they tend to be thinly traded and because the
companies are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
12
<PAGE> 69
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 1, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
[CHART]
ANNUAL TOTAL RETURN for years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
(CHART)
CLASS A SHARES
--------------
<S> <C>
'97 -12.52
'98 5.24
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q1 '98: 17.44%
Worst quarter Q3 '98: (14.96%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
---------------------------------------------------------------------------
HSBC JAMES
CAPEL WORLD
(EX-US) SMALL
COMPANY
CLASS A CLASS B CLASS C CLASS I** INDEX
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ (0.81%) (0.54%) 3.55% n/a 3.31%
Since inception*..... (6.88%) (6.73%) (4.72%) n/a (5.13%)
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for all Classes was January 1, 1997. Index performance
is calculated from the same date.
**The Fund has had no outstanding Class I shares.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
- -------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................ 5.75% none none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)................ none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested
dividends............. none none none none
Redemption fee*....... none none none none
Exchange fee.......... none none none none
*If you choose to receive your redemption proceeds via
Federal Funds wire, a $10 wire fee will be charged to your
account.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees...... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1)
fees................. 0.25% 1.00% 1.00% none
Other expenses....... 4.88% 4.90% 4.82% 4.79%
Total annual Fund
operating expenses... 6.13% 6.90% 6.82% 5.79%
Expenses
reimbursed*.......... 3.91% 3.91% 3.91% 3.91%
Net Fund
operating
expenses*............ 2.22% 2.99% 2.91% 1.88%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 787 $ 802 $ 302 $ 394 $ 294 $ 191
3rd 1,335 1,334 1,034 1,010 1,010 704
5th 1,907 1,987 1,787 1,749 1,749 1,244
10th 3,455 3,598 3,598 3,698 3,698 2,720
</TABLE>
13
<PAGE> 70
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
PAN-EUROPE
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of large
and medium-sized European companies.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities may be selected for the Fund that may not perform as
well as the securities held by other mutual funds with investment objectives
that are similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
EURO CONVERSION RISKS: On January 1, 1999, a new European currency called the
"euro" was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from January
1, 1999 through December 31, 2001, at which time euro bills and coins will be
put into circulation. Certain European Union members, including the United
Kingdom, did not officially implement the euro on January 1, 1999 and may cause
market disruptions when and if they decide to do so. Should this occur, the Fund
could experience investment losses.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
14
<PAGE> 71
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on May 13, 1997 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
(CHART)
<S> <C>
'98 6.72
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q1 '98: 17.61%
Worst quarter Q3 '98: (21.25%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
----------------------------------------------------------------------
MORNINGSTAR
MSCI EUROPE
EUROPE STOCK
CLASS A CLASS B CLASS C INDEX UNIVERSE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 0.59% 0.98% 1.38% 24.50% 18.97%
Since inception*..... 3.71% 4.54% 2.38% 23.66% 17.10%
</TABLE>
# Performance figures reflect any applicable sales charges.
* The inception date for all Classes was May 13, 1997. MSCI performance is
calculated from May 30, 1997. Morningstar performance is calculated from
June 1, 1997.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................. 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)................. none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends... none none none
Redemption fee*........ none none none
Exchange fee........... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees........ 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 4.31% 4.34% 4.33%
Total annual Fund
operating expenses..... 5.56% 6.34% 6.33%
Expenses reimbursed*... 3.37% 3.37% 3.37%
Net Fund operating
expenses*.............. 2.19% 2.97% 2.96%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 784 $ 800 $ 300 $ 399 $ 299
3rd 1,327 1,328 1,028 1,025 1,025
5th 1,894 1,979 1,779 1,774 1,774
10th 3,429 3,580 3,580 3,745 3,745
</TABLE>
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INTERNATIONAL EQUITY FUNDS
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ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY EUROPEAN OPPORTUNITIES FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing primarily in the equity
securities of companies located or otherwise doing business in European
countries and covering a broad range of economic and industry sectors. The Fund
may also invest a significant portion of its assets in debt securities, up to
20% of which is considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). The Fund's manager follows a "bottom-up" approach to
investing, which focuses on prospects for long term earnings growth. Company
selection is generally based on an analysis of a wide range of indicators (such
as growth, earnings, cash, book and enterprise value), as well as factors such
as market position, competitive advantage and management strength. Country and
sector allocation decisions are driven by the company-selection process.
IVY GLOBAL FUND: The Fund seeks to achieve its principal objective of long-term
capital growth by investing primarily in the equity securities of companies
throughout the world. The Fund invests in a variety of economic sectors,
industry segments and individual securities to reduce the effects of price
volatility in any one area, and normally invests its assets in at least three
different countries (including the United States). Countries are selected on the
basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund seeks to achieve its principal
objective of long-term growth by investing primarily in the equity securities of
companies throughout the world that own, explore or develop natural resources
and other basic commodities (or that supply goods and services to such
companies). The Fund's manager targets for investment well managed companies
that are expected to increase shareholder value through successful exploration
and development of natural resources, balancing the Fund's portfolio with low
cost, low debt producers that have outstanding asset bases, and positions that
are based on anticipated commodity price trends. Additional emphasis is placed
on sectors that are out of favor but appear to offer the most significant
recovery potential over a one to three year period. All investment decisions are
reviewed systematically and cash reserves may be allowed to build up when
valuations seem unattractive. The manager attempts to minimize risk through
diversifying the Fund's portfolio by commodity, country, issuer and asset class.
Typically the Fund's top 50 investments comprise more than 80% of the Fund's
assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing in the common stock of
companies that are expected to profit from the development, advancement and use
of science and technology. The Fund may also invest in companies that are
expected to benefit indirectly from the commercialization of technological and
scientific advances. Industries likely to be represented in the Fund's overall
portfolio holdings include internet, computers and peripheral products,
software, electronic components and systems, telecommunications, and media and
information services. Rapid advances in these industries in recent years have
stimulated unprecedented growth. While this is no guarantee of future
performance, the Fund's management team believes that these industries offer
substantial opportunities for long-term capital appreciation. The Fund intends
to invest its assets in at least three different countries, but may at any given
time have a substantial portion of its assets invested in the United States.
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- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II: The Fund seeks to achieve its principal objective of
long-term capital growth by investing in equity securities principally traded in
European, Pacific Basin and Latin American markets. The Fund invests in a
variety of economic sectors and industry segments to reduce the effects of price
volatility in any one area. The Fund's manager seeks out rapidly expanding
foreign economies and companies that generally have at least $1 billion in
capitalization at the time of investment and a solid history of operations.
Other factors that the Fund's manager considers in selecting particular
countries include long term economic growth prospects, anticipated inflation
levels, and the effect of applicable government policies on local business
conditions. The Fund is managed using a value approach, which focuses on
financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing in the foreign stock markets,
focusing on issuers that are valued at less than $1 billion across a wide range
of geographic, economic and industry sectors. Countries are selected on the
basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
IVY PAN-EUROPE FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the equity securities of
companies located or otherwise doing business in European countries and that
cover a broad range of economic and industry sectors. The Fund may also invest a
significant portion of its assets outside of Europe. Countries are selected on
the basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: The table on the following page identifies the investment
techniques that each Fund's advisor considers important in achieving the Fund's
investment objective or in managing its exposure to risk (and that could
therefore have a significant effect on a Fund's returns). Following the table is
a description of the general risk characteristics of these investment
techniques. Other investment methods that the Funds may use (such as derivative
investments), but that are not likely to play a key role in their overall
investment strategies, are described in the Funds' Statement of
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
Additional Information (see back cover page for information on how you can
receive a free copy).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
INVESTMENT
TECHNIQUE: IEOF IGF IGNRF IGSTF IIF2 IISCF IPEF
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stocks........ X X X X X X X
Debt securities...... X
Low-rated debt
securities........... X
Foreign securities... X X X X X X X
Emerging markets..... X X X X X X X
Foreign currencies... X X X X X X X
Depository
receipts............ X X X X X X X
Derivatives.......... X X
Illiquid
securities.......... X X X X X X X
Precious metals...... X
Borrowing............ X X X X X X X
Temporary defensive
positions............ X X X X X X X
</TABLE>
RISK CHARACTERISTICS
- - COMMON STOCKS: Common stocks represent a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - 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. For example, 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. A Fund's portfolio is therefore susceptible to the decline in
value of the debt instruments it holds in a rising interest rate environment.
The market value of debt securities also tends to vary according to the
relative financial condition of the issuer. Bonds with longer maturities tend
to be more volatile than bonds with shorter maturities.
- - LOW-RATED DEBT SECURITIES: In general, low-rated debt securities (commonly
referred to as "high yield" or "junk" 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.
For this reason, these bonds are considered speculative and could
significantly weaken a Fund's returns.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect a Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets. Many of the Funds' securities also are
denominated in foreign currencies and the value of each Fund's investments, as
measured in U.S. dollars, may be affected favorably or unfavorably by changes
in foreign currency exchange rates and exchange control regulations. Currency
conversions can also be costly.
Other factors that can affect the value of a Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that
many foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards. It may also be difficult to obtain reliable
information about the securities and business operations of certain foreign
issuers. Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
- securities that are even less liquid and more volatile than those in more
developed foreign countries;
- less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- increased settlement delays;
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- unusually high inflation rates (which in extreme cases can cause the value
of a country's assets to erode sharply);
- unusually large currency fluctuations and currency conversion costs; and
- high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DEPOSITORY RECEIPTS: Interests in foreign issuers may be acquired in the form
of sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs") and similar types of depository receipts. ADRs
typically are issued by a U.S. bank or trust company and represent ownership
of the underlying securities issued by a foreign corporation. GDRs and other
types of depository receipts are usually issued by foreign banks or trust
companies. The investing Fund's investments in ADRs, GDRs and other depository
receipts are viewed as investments in the underlying securities.
Depository receipts can be difficult to price and are not always
exchange-listed. Unsponsored depository programs also are organized
independently 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.
- - DERIVATIVE INVESTMENT TECHNIQUES: A Fund may, but is not required to, use
certain derivative investment techniques to hedge various market risks (such
as interest rates, currency exchange rates and broad or specific market
movements) or to enhance potential gain. Among the derivative techniques a
Fund might use are options, futures, forward foreign currency contracts and
foreign currency exchange transactions.
Using put and call options could cause a Fund to lose money by forcing the
sale or purchase of portfolio securities at inopportune times or for prices
higher (in the case of put options) or lower (in the case of call options)
than current market values, by limiting the amount of appreciation the Fund
can realize on its investments, or by causing the Fund to hold a security it
might otherwise sell.
Futures transactions (and related options) involve other types of risks. For
example, the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of a Fund
could cause losses on the hedging instrument that are greater than gains in
the value of the Fund's position. In addition, futures and options markets may
not be liquid in all circumstances and certain over-the-counter options may
have no markets. As a result, a Fund might not be able to close out a
transaction before expiration without incurring substantial losses (and it is
possible that the transaction cannot even be closed). In addition, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium.
Foreign currency transactions (such as forward foreign currency contracts) can
cause investment losses in a variety of ways. For example, changes in currency
exchange rates may result in poorer overall performance for a Fund than if it
had not engaged in such transactions. There may also be an imperfect
correlation between a Fund's portfolio holdings of securities denominated in a
particular currency and the forward contracts entered into by the 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.
- - ILLIQUID SECURITIES: "Illiquid securities" are assets that may not be disposed
of in the ordinary course of business within seven days at roughly the value
at which the investing fund has valued the assets. These may be "restricted
securities," which cannot be sold to the public without registration under the
Securities Act of 1933 (in the absence of an exemption) or because of other
legal or contractual restrictions on resale. Thus, while illiquid securities
may offer the potential for higher returns than more readily marketable
securities, there is a risk that the investing fund will not be able to
dispose of them promptly at an acceptable price.
- - PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES: Ivy Global Natural Resources
Fund can invest in precious metals and other physical commodities. Commodities
trading is
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INTERNATIONAL EQUITY FUNDS
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generally considered speculative because of the significant potential for
investment loss. Among the factors that could affect the value of the Fund's
investments in commodities are cyclical economic conditions, sudden political
events and adverse international monetary policies. Markets for precious
metals and other commodities are likely to be volatile and there may be sharp
price fluctuations even during periods when prices overall are rising. The
Fund may also pay more to store and accurately value its commodity holdings
than it does with its other portfolio investments.
- - BORROWING: For temporary or emergency purposes, Ivy Global Fund, Ivy Global
Science & Technology Fund and Ivy International Fund II may borrow up to 10%
of the value of its total assets from qualified banks. Ivy European
Opportunities Fund, Ivy Global Natural Resources Fund, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund may borrow up to one-third of the value
of its total assets from qualified banks, but (with the exception of Ivy
European Opportunities Fund) will not buy securities whenever its outstanding
borrowings exceed 10% of the value of its total assets. Borrowing may
exaggerate the effect on a Fund's share value of any increase or decrease in
the value of the securities it holds. Money borrowed will also be subject to
interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: A Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective. Its exposure to the risks associated with debt securities would
also be heightened (see "Debt Securities" above).
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: The Funds may have investments in Europe. On January 1,
1999, a new European currency called the "euro" was introduced and adopted for
use by eleven European countries. The transition to daily usage of the euro will
occur during the period from January 1, 1999 through December 31, 2001, at which
time euro bills and coins will be put into circulation. Certain European Union
members, including the United Kingdom, did not officially implement the euro on
January 1, 1999 and may cause market disruptions when and if they decide to do
so. Should this occur, a Fund could experience investment losses.
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the Year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
MANAGEMENT
- -- INVESTMENT ADVISORS
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides business management services to the Funds and investment advisory
services to all Funds other than Ivy European Opportunities Fund and Ivy Global
Natural Resources Fund. IMI is an SEC-registered investment advisor with over $5
billion in assets under management, and provides similar services to the other
twelve series of Ivy Fund. For the Funds' fiscal year ending December 31, 1998,
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the Funds (other than Ivy European Opportunities Fund) each paid IMI a fee that
was equal to 1.00% of the Funds' respective average net assets. Ivy European
Opportunities Fund will pay IMI a fee equal to 1.00% of the Fund's average net
assets.
Henderson Investment Management Limited ("Henderson"), 3 Finsbury Avenue,
London, England EC2M 2PA, serves as subadviser to Ivy European Opportunities
Fund under an Agreement with IMI. For its services, Henderson receives a fee
from IMI that is equal, on an annual basis, to 0.50% of the Fund's average net
assets. As of February 1, 1999, Henderson also serves as subadviser with respect
to 50% of the net assets of Ivy International Small Companies Fund, for which
Henderson receives a fee from IMI that is equal, on an annual basis, to 0.50% of
that portion of the Fund's assets that Henderson manages. Henderson is an
indirect, wholly owned subsidiary of AMP Limited, an Australian life insurance
and financial services company located in New South Wales, Australia.
Mackenzie Financial Corporation ("MFC"), 150 Bloor Street West, Suite 400,
Toronto, Ontario, Canada M5S 3B5, serves as the investment adviser to Ivy Global
Natural Resources Fund and is responsible for selecting the Fund's portfolio
investments. MFC has been an investment counsel and mutual fund manager in
Toronto for more than 30 years, and has over $17.8 billion in assets under
management. For the Fund's fiscal year ending December 31, 1998, the Fund paid
to MFC an aggregate fee equal to 0.50% of the Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY EUROPEAN OPPORTUNITIES FUND: Stephen Peak, Executive Director of Henderson
and head of Henderson's European equities team, is primarily responsible for
selecting the Fund's portfolio of investments. Formerly a director and portfolio
manager with Touche Remnant & Co., Mr. Peak has 24 years of investment
experience.
IVY GLOBAL FUND: Barbara Trebbi, a Senior Vice President of IMI, manages the
foreign portion of the Fund's portfolio. She is also Managing Director of
International Equities and a member of the Ivy international portfolio
management team. Ms. Trebbi joined IMI in 1988 and has 11 years of professional
investment experience. She is a Chartered Financial Analyst and holds a graduate
diploma from the London School of Economics. Paul P. Baran, a Senior Vice
President of IMI, manages the domestic portion of the Fund's portfolio. Before
joining IMI, Mr. Baran was Senior Vice President/Chief Investment Officer of
Central Fidelity National Bank. He has 24 years of professional investment
experience and is a Chartered Financial Analyst. He has an MBA from Wayne State
University.
IVY GLOBAL NATURAL RESOURCES FUND: Frederick Sturm, a Senior Vice President of
MFC, has managed the Fund since its inception. Mr. Sturm joined MFC in 1983 and
has 14 years of professional investment experience. He is a Chartered Financial
Analyst and holds a graduate degree in commerce and finance from the University
of Toronto.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund is managed by IMI's Global
Technology Team. James W. Broadfoot, President of IMI and a Vice President of
Ivy Fund, is the Team's lead manager. Before joining IMI in 1990, Mr. Broadfoot
was the principal in an investment counsel firm specializing in emerging growth
companies. He has over 25 years of professional investment experience, holds an
MBA from the Wharton School of Business and is a Chartered Financial Analyst.
IVY INTERNATIONAL FUND II: Barbara Trebbi, a Senior Vice President of IMI, has
managed the Fund since its inception. She is also Managing Director of
International Equities and a member of the Ivy international portfolio
management team. Ms. Trebbi joined IMI in 1988 and has 11 years of professional
investment experience. She is a Chartered Financial Analyst and holds a graduate
diploma from the London School of Economics.
Ms. Trebbi is supported by a team of research analysts who are responsible for
providing information on regional and country-specific economic and political
developments and monitoring individual companies. These analysts use a variety
of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
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INTERNATIONAL EQUITY FUNDS
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- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund is managed using a team
approach. IMI's international equity team is comprised of investment
professionals and is supported by research analysts who acquire information on
regional and country-specific economic and political developments and monitor
individual companies. These analysts use a variety of research sources that
include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
The Henderson team's investment process combines top down regional allocation
with a bottom up stock selection approach. Regional allocations are based on
factors such as interest rates and current economic cycles, which are used to
identify economies with relatively strong prospects for real economic growth.
Individual stock selections are based largely on prospects for earnings growth.
IVY PAN-EUROPE FUND: The Fund is managed by a team of investment professionals
that is supported by research analysts who acquire information on regional and
country-specific economic and political developments and monitor individual
companies. These analysts use a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
SHAREHOLDER INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's
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share price and/or performance information is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value next determined after your instructions are received in
proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's transfer agent)
or by your registered securities dealer. Each purchase and redemption order is
subject to any applicable sales charge (see "Choosing the appropriate class of
shares"). Since the Funds normally invest in securities that are listed on
foreign exchanges that may trade on weekends or other days when the Funds do not
price their shares, each Fund's share value may change on days when shareholders
will not be able to purchase or redeem the Fund's shares.
- -- HOW TO BUY SHARES
Please read these sections below carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
The essential features of the Funds' different classes of shares are described
below. If you do not specify on your Account Application which class of shares
you are purchasing, it will be assumed that you are purchasing Class A shares.
Each Fund has adopted separate distribution plans pursuant to Rule 12b-1 under
the 1940 Act for its Class A, B and C shares that allow the Fund to pay
distribution and other fees for the sale and distribution of its shares and for
services provided to shareholders. Because fees are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
- - CLASS A SHARES: Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% (the "offering price"). The sales charge may be reduced
or eliminated if certain conditions are met (see "Additional purchase
information"). Class A shares are subject to a 0.25% Rule 12b-1 service fee.
- - CLASS B SHARES: Class B shares are offered at net asset value, without an
initial sales charge, but subject to a contingent deferred sales charge
("CDSC") that declines from 5% to zero on certain redemptions within six years
of purchase. Class B shares are subject to a 0.75% Rule 12b-1 distribution fee
and a 0.25% Rule 12b-1 service fee, and convert automatically into Class A
shares eight years after purchase.
- - CLASS C SHARES: Class C shares are offered at net asset value, without an
initial sales charge, but subject to a CDSC of 1% for redemptions within the
first year of purchase. Class C shares are subject to a 0.75% Rule 12b-1
distribution fee and a 0.25% Rule 12b-1 service fee.
- - CLASS I SHARES: Class I shares are offered to certain classes of investors of
Ivy European Opportunities Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II and Ivy International Small Companies Fund without any
sales load or Rule 12b-1 fees.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000 $5,000,000
Minimum subsequent
investment*.......... $100 $100 $100 $10,000
Initial sales
charge............... Maximum none none none
5.75%, with
options for a
reduction or
waiver
CDSC.................. None, except Maximum 1.00% for the none
on certain 5.00%, first year
NAV purchases declines over
six years
Service and
distribution fees.... 0.25% Service 0.75% 0.75% none
fee Distribution distribution
fee and 0.25% fee and 0.25%
service fee service fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
23
<PAGE> 80
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
- -- ADDITIONAL PURCHASE INFORMATION
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth below
(which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED 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 of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher) of all Ivy Fund Class A shares you
own.
- A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the following
methods:
- - through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- - under certain qualified retirement plans;
- - as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- - as an employee of a selected dealer; or
- - through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Funds 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 SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc. ("IMDI"),
the Fund's distributor, may pay the dealer or agent (out of IMDI's own
resources) for its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASE AMOUNT COMMISSION
- --------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those 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 time period.
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by the
Distributor. This privilege will apply only to Class A shares of a Fund that are
purchased using proceeds obtained by such clients through redemption of another
mutual fund's shares on which a sales charge was paid. Purchases must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
after purchase.
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 you redeem your Class C
shares within one year of purchase they will be subject to a CDSC of 1%, and
Class B shares
24
<PAGE> 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
redeemed within six years of purchase will be subject to a CDSC at the following
rates:
<TABLE>
<CAPTION>
- ----------------------------------------------------
CDSC AS A PERCENTAGE
YEAR SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- ----------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares 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. No charge will be assessed on increases in account value
above the original purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - Shares held more than six years
- - Shares acquired through reinvestment of dividends and distributions
- - Shares subject to the lowest CDSC percentage; on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation redeemed
first, which is not subject to a CDSC; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
- - Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- - Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- - Redemptions resulting from a tax-free return of excess contribution to an IRA.
- - Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- - Withdrawals through the Systematic Withdrawal Plan of up to 12% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales-related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for federal income
tax purposes. Class C shares do not have a similar conversion privilege.
CLASS I SHARES: Class I shares are offered 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.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check the class of shares you wish to invest in
(see page 23 for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
25
<PAGE> 82
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in the Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required. When you redeem, IMSC will normally send redemption proceeds to
you on the next business day, but may take up to seven days (or longer in the
case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within
26
<PAGE> 83
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
six years of purchase, and to Class C shares that are redeemed within one year
of purchase.
- - 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, unless you instruct otherwise.
- - Any shares subject to a CDSC will be redeemed last unless you specifically
elect otherwise.
- - Shares will be redeemed in the order described under "Additional purchase
information -- Class B and Class C shares".
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 25 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or a
capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain Funds) or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a CDSC regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will be mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends annually. The Funds will distribute net investment
income and net realized capital gains, if any, at least once a year. The Funds
may make an additional distribution of net investment income and net realized
capital gains to comply with the calendar year distribution requirement under
the
27
<PAGE> 84
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
excise tax provisions of Section 4982 of the Internal Revenue Code of 1986, as
amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you 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. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by your
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Funds
under applicable state or local law.
28
<PAGE> 85
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
29
<PAGE> 86
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance for the past five years (or less if a Fund has
a shorter operating history), and reflects results for a single Fund share.
Ivy European Opportunities Fund commenced operations on May 3, 1999, and
accordingly, no financial information is presented for that Fund. The total
returns in the table represent the rate an investor would have earned (or
lost) each year on an investment in each Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, is included in its Annual Report to shareholders (which is
available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY GLOBAL FUND --------------------------------------------------------------------------
for the six for the
for the year ended months ended year ended
December 31, December 31, June 30,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1994
SELECTED PER SHARE DATA --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62
--------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)....................... .02(a) .08 .08 .09(a) --(a) --(a)
Net gains or losses on securities (both realized
and unrealized).................................. .91 (1.23) 1.86 1.25 (.10) 1.79
--------------------------------------------------------------------------
Total from investment operations................... .93 (1.15) 1.94 1.34 (.10) 1.79
--------------------------------------------------------------------------
Less distributions
Dividends
From net investment income....................... -- .05 .08 .04 -- .01
In excess of net investment income............... -- .05 .18 -- -- --
Distributions
From net realized gain........................... .54 .99 .48 .49 .09 .88
In excess of net realized gain................... -- -- -- .07 -- --
Returns of capital............................... -- -- -- -- .10 --
--------------------------------------------------------------------------
Total distributions................................ .54 1.09 .74 .60 .19 .89
--------------------------------------------------------------------------
Net asset value, end of period...................... $ 11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total return (%).................................... 8.59(b) (8.72)(b) 16.21(b) 12.08(b) (1.00)(c) 16.71(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 14,660 $19,692 $24,152 $21,264 $ 19,327 $17,393
Ratio of expenses to average net assets
With expense reimbursement (%)..................... 2.18 -- -- 2.20 2.20(d) 2.20
Without expense reimbursement (%).................. 2.54 2.07 2.18 2.46 2.34(d) 2.42
Ratio of net investment income (loss) to average net
assets (%)......................................... .16(a) .58 .58 .71(a) (.06)(a)(d) .01(a)
Portfolio turnover rate (%)......................... 17 45 43 53 23 85
</TABLE>
30
<PAGE> 87
<TABLE>
<CAPTION>
CLASS B CLASS C
-----------------------------------------------------------------------------------------------------------------------
for the period for the period
for the six April 1, 1994 for the April 30, 1996
for the year ended months ended (Commencement) year ended (Commencement)
December 31, December 31, to June 30, December 31, to December 31,
-----------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1994 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$10.90 $ 13.12 $11.97 $11.23 $11.52 $12.12 $10.67 $12.94 $13.31
-----------------------------------------------------------------------------------------------------------------------
(.09)(a) (.02) (.02) --(a) (.03)(a) (.01)(a) (.16)(a) (.02) (.01)
.92 (1.20) 1.85 1.25 (.12) (.04) .93 (1.24) .42
-----------------------------------------------------------------------------------------------------------------------
.83 (1.22) 1.83 1.25 (.15) (.05) .77 (1.26) .41
-----------------------------------------------------------------------------------------------------------------------
-- .05 -- -- -- -- -- .05 --
-- .05 .20 -- -- -- -- .05 .30
.54 .90 .48 .45 .08 .55 .54 .91 .48
-- -- -- .06 -- -- -- -- --
-- -- -- -- .06 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------
.54 1.00 .68 .51 .14 .55 .54 1.01 .78
-----------------------------------------------------------------------------------------------------------------------
$11.19 $ 10.90 $13.12 $11.97 $11.23 $11.52 $10.90 $10.67 $12.94
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
7.69(b) (9.33)(b) 15.30(b) 11.25(b) (1.37)(c) .38(c) 7.30(b) (9.72)(b) 3.07(c)
$7,495 $10,056 $8,968 $4,811 $2,956 $ 376 $ 428 $ 727 $ 71
2.97 -- -- 2.95 2.95(d) 2.95(d) 3.30 -- --
3.33 2.82 2.94 3.21 3.09(d) 3.17(d) 3.66 2.82 3.77(d)
(.63)(a) (.18) (.17) (.04)(a) (.81)(a)(d) (.74)(a)(d) (.96)(a) (.18) (1.01)(d)
17 45 43 53 23 85 17 45 43
</TABLE>
- -------------------------------------------------------------------------------
(a) Net investment
income (loss) is net of
expenses reimbursed
by manager.
(b) Total return does
not reflect a sales
charge.
(c) Total return repre-
sents aggregate total
return and does not
reflect a sales charge.
(d) Annualized
31
<PAGE> 88
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
IVY GLOBAL NATURAL -----------------------------------------------------------
RESOURCES FUND for the year ended December 31,
- --------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
SELECTED PER SHARE DATA -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.01 $10.00 $ 9.00 $10.00 $ 9.00 $10.00
Income (loss) from investment operations
Net investment income (loss)(a)........................... .03 (.11) (.04) (.15) (.14) (.17)
Net gains or losses on securities (both realized and
unrealized)............................................. (2.68) .70 (2.65) .68 (2.61) .68
-----------------------------------------------------------
Total from investment operations.......................... (2.65) .59 (2.69) .53 (2.75) .51
-----------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. .04 .22 .04 .17 .04 .15
Distributions
From net realized gain.................................. -- 1.08 -- 1.08 -- 1.08
In excess of net realized gain.......................... -- .28 -- .28 -- .28
-----------------------------------------------------------
Total distributions..................................... .04 1.58 .04 1.53 .04 1.51
-----------------------------------------------------------
Net asset value, end of period.............................. $ 6.32 $ 9.01 $ 6.27 $ 9.00 $ 6.21 $ 9.00
-----------------------------------------------------------
-----------------------------------------------------------
Total return (%)(b)......................................... (29.35) 6.95 (29.82) 6.28 (30.49) 6.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,345 $3,907 $ 1,320 $2,706 $ 41 $ 124
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.22 2.10 2.90 2.86 3.57 3.08
Without expense reimbursement (%)......................... 5.75 2.88 6.43 3.64 7.10 3.86
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .29 (1.10) (.39) (1.86) (1.06) (2.08)
Portfolio turnover rate (%)................................. 98 199 98 199 98 199
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY GLOBAL SCIENCE & TECHNOLOGY FUND ------------------------------------------------
for the period
July 22, 1996
for the year ended (Commencement)
December 31, to December 31,
- -----------------------------------------------------------------------------------------------------------------
1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.47 $ 16.40 $10.00
Income from investment operations
Net investment loss........................................ (.36)(e) (.31)(e) (.06)(a)
Net gains or losses on securities (both realized and
unrealized).............................................. 6.52(e) 1.38(e) 6.49
--------------------------------------------
Total from investment operations........................... 6.16 1.07 6.43
--------------------------------------------
Less distributions
Distributions from net realized gain....................... -- -- .03
--------------------------------------------
Total distributions...................................... -- -- .03
--------------------------------------------
Net asset value, end of period.............................. $ 23.63 $ 17.47 $16.40
--------------------------------------------
--------------------------------------------
Total return (%)............................................ 35.26(b) 6.53(b) 64.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $17,888 $12,159 $8,324
Ratio of expenses to average net assets
With expense reimbursement (%)............................. -- -- 2.19(d)
Without expense reimbursement (%).......................... 2.16 2.11 2.90(d)
Ratio of net investment loss to average net assets (%)...... (1.88) (1.91) (2.18)(a)(d)
Portfolio turnover rate (%)................................. 73 54 23
</TABLE>
32
<PAGE> 89
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
- -----------------------------------------------------------------------------------------
for the period for the period
July 22, 1996 July 22, 1996
for the year ended (Commencement) for the year ended (Commencement)
December 31, to December 31, December 31, to December 31,
- ----------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 17.37 $ 16.44 $ 10.00 $ 17.40 $ 16.46 $ 10.00
(.50)(e) (.32)(e) (.06)(a) (.48)(e) (.42)(e) (.05)(a)
6.44(e) 1.25(e) 6.52 6.46(e) 1.36(e) 6.53
- ----------------------------------------------------------------------------------------
5.94 .93 6.46 5.98 .94 6.48
- ----------------------------------------------------------------------------------------
-- -- .02 -- -- .02
- ----------------------------------------------------------------------------------------
-- -- .02 -- -- .02
- ----------------------------------------------------------------------------------------
$ 23.31 $ 17.73 $ 16.44 $ 23.38 $ 17.40 $ 16.46
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
$ 34.20(b) $ 5.66(b) $ 64.59(c) 34.37(b) 5.71(b) 64.84(c)
$10,197 $ 8,577 $ 3,425 $ 8,431 $ 6,348 $ 2,106
-- -- 2.99(d) -- -- 2.95(d)
2.95 2.92 3.70(d) 2.84 2.85 3.66(d)
(2.67) (2.72) (2.98)(a)(d) (2.56) (2.65) (2.94)(a)(d)
73 54 23 73 54 23
</TABLE>
(a) Net investment
loss is net of expenses
reimbursed by Manager.
(b) Total return
does not reflect
a sales charge.
(c) Total return
represents aggregate
total return and
does not reflect
a sales charge.
(d) Annualized
(e) Based on average
shares outstanding.
33
<PAGE> 90
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY INTERNATIONAL FUND II ---------------------------------------
for the period
for the May 13, 1997
year ended (Commencement)
December 31, to December 31,
- ------------------------------------------------------------------------------------------------------
1998 1997
SELECTED PER SHARE DATA ---------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.98 $ 10.01
---------------------------------------
Income (loss) from investment operations
Net investment income (a)................................. .08 --(f)
Net gains or losses on securities (both realized and
unrealized)............................................. .52 (1.03)(f)
---------------------------------------
Total from investment operations.......................... .60 (1.03)
---------------------------------------
Less distributions
Dividends from net investment income...................... .08 --
Distributions from net realized gain...................... .02 --
---------------------------------------
Total distributions..................................... .10 --
---------------------------------------
Net asset value, end of period.............................. $ 9.48 $ 8.98
---------------------------------------
---------------------------------------
Total return (%)............................................ 6.63(b) (10.29)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $24,993 $16,202
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.74 1.80(e)
Without expense reimbursement (%)......................... 1.88 2.11(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .80 .12(e)
Portfolio turnover rate (%)................................. 16 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
IVY INTERNATIONAL SMALL ----------------------------------------------------------
COMPANIES FUND for the year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
SELECTED PER SHARE DATA ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $8.66 $ 10.00 $ 8.63 $ 10.00 $ 8.65 $ 10.00
----------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .04 (.01) (.03) (.05) (.03) (.06)
Net gains or losses on securities (both realized and
unrealized)............................................. .41 (1.24) .41 (1.27) .42 (1.25)
----------------------------------------------------------
Total from investment operations.......................... .45 (1.25) .38 (1.32) .39 (1.31)
----------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. .15 -- .08 -- .06 --
Distributions from net realized gain...................... .01 .09 .01 .05 .01 .04
----------------------------------------------------------
Total distributions..................................... .16 .09 .09 .05 .07 .04
----------------------------------------------------------
Net asset value, end of period.............................. $8.95 $ 8.66 $ 8.92 $ 8.63 $ 8.97 $ 8.65
----------------------------------------------------------
----------------------------------------------------------
Total return (%)(b)......................................... 5.24 (12.52) 4.46 (13.19) 4.55 (13.14)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 980 $ 992 $1,027 $ 1,007 $1,125 $ 1,574
Ratio of expenses to average net assets (c)
With expense reimbursement (%)............................ 2.47 2.50 3.24 3.31 3.16 3.23
Without expense reimbursement (%)......................... 6.38 4.87 7.15 5.68 7.07 5.60
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .39 (.11) (.38) (.91) (.30) (.83)
Portfolio turnover rate (%)................................. 18 10 18 10 18 10
</TABLE>
34
<PAGE> 91
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------------------------------------
for the period for the period
for the May 13, 1997 for the May 13, 1997
year ended (Commencement) year ended (Commencement)
December 31, to December 31, December 31, to December 31,
- -------------------------------------------------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 8.93 $ 10.01 $ 8.93 $ 10.01
- -------------------------------------------------------------------
.01 (.02)(f) .01 (.02)(f)
.51 (1.06)(f) .51 (1.06)(f)
- -------------------------------------------------------------------
.52 (1.08) .52 (1.08)
- -------------------------------------------------------------------
.01 -- .01 --
.02 -- .02 --
- -------------------------------------------------------------------
.03 -- .03 --
- -------------------------------------------------------------------
$ 9.42 $ 8.93 $ 9.42 $ 8.93
- -------------------------------------------------------------------
- -------------------------------------------------------------------
5.84(b) (10.29)(d) 5.79(b) (10.79)(d)
$80,938 $53,652 $40,408 $27,074
2.49 2.63(e) 2.52 2.63(e)
2.63 2.94(e) 2.66 2.94(e)
.05 (.71)(e) .03 (.71)(e)
16 10 16 10
</TABLE>
(a) Net investment
income (loss) is net of
expenses reimbursed
by manager.
(b) Total return
does not reflect
a sales charge.
(c) Total expenses
include fees paid
indirectly, if any,
through an expense
offset arrangement.
(d) Total return
represents aggregate
total return
and does not
reflect a
sales charge.
(e) Annualized
(f) Based on average
shares outstanding.
35
<PAGE> 92
36
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
IVY PAN-EUROPE FUND CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------
for the period for the period for the period
for the year May 13, 1997 for the year May 13, 1997 January 29, 1998
ended (Commencement) ended (Commencement) (Commencement)
December 31, to December 31, December 31, to December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998
SELECTED PER SHARE DATA ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $10.56 $10.02 $10.54 $10.02 $10.91
---------------------------------------------------------------------------------------
Income from investment operations
Net investment loss (a)............. (.01)(f) (.02) (.01)(f) (.03) (.02)(f)
Net gains or losses on securities
(both realized and unrealized).... .72(f) .58 .64(f) .56 .28(f)
---------------------------------------------------------------------------------------
Total from investment operations.... .71 .56 .63 .53 .26
---------------------------------------------------------------------------------------
Less distributions
Distributions from net realized
gain.............................. -- .02 -- .01 --
---------------------------------------------------------------------------------------
Total distributions............... -- .02 -- .01 --
---------------------------------------------------------------------------------------
Net asset value, end of period........ $11.27 $10.56 $11.17 $10.54 $11.17
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)...................... 6.72(d) 5.54(b) 5.98(d) 5.26(b) 2.38(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $1,862 $ 575 $3,604 $ 70 $ 863
Ratio of expenses to average net
assets (e)
With expense reimbursement (%)...... 2.49 2.20(c) 3.27 3.29(c) 3.26(c)
Without expense reimbursement (%)... 5.86 28.41(c) 6.64 29.50(c) 6.63(c)
Ratio of net investment loss to
average net assets (%)(a)........... (.12) (.48)(c) (.90) (1.58)(c) (.89)(c)
Portfolio turnover rate (%)........... 25 5 25 5 25
</TABLE>
(a) Net investment
loss is net of
expenses reimbursed
by manager.
(b) Total return represents
aggregate total return
and does not reflect
a sales charge.
(c) Annualized
(d) Total return
does not reflect
a sales charge.
(e) Total expenses include
fees paid indirectly,
if any, through an
expense offset arrangement.
(f) Based on average
shares outstanding.
<PAGE> 93
Account
Application
FUND USE ONLY
__________________________
Account Number
__________________________
Dealer/Branch/Rep
__________________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which
Ivy Fund (IBT) is custodian.
1 REGISTRATION
Name_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Address _________________________________________________________________
City_______________________________________State__________ Zip___________
Phone # (day) (____)_____________ Phone # (evening) (___)________________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence _______________
2 TAX I.D.
Citizenship: ___ U.S. ___ Other (please specify):___________________
Social security # ______-____-______ or Tax identification______________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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___________
Representative's name ___________________________________________________
Representative's #___________________ Representative's phone_____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) for________ made payable to the
appropriate fund. Please invest it in:
________________ Class A
________________ Class B
________________ Class C
________________ Class I shares ("*" Funds only) of the following fund(s):
<TABLE>
<S> <C>
$ _____________ Ivy European Opportunities Fund* $ _____________ Ivy International Fund II*
$ _____________ Ivy Global Fund $ _____________ Ivy International Small Companies Fund*
$ _____________ Ivy Global Natural Resources Fund $ _____________ Ivy Pan-Europe Fund
$ _____________ Ivy Global Science & Technology Fund*
</TABLE>
B. I qualify for a reduction or elimination of the 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 the account(s) listed below.
<TABLE>
<S> <C>
Fund name: Fund name:
____________________________________ _________________________________
Account #: Account #:
____________________________________ _________________________________
</TABLE>
If establishing a Letter of Intent, you will need to purchase Class A
shares over a 13-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
C. FOR DEALER USE ONLY
Confirmed trade orders: ______________ ________________ __________
Confirm Number Number of Shares Trade Date
<PAGE> 94
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 the same class of a different Ivy fund account.
Fund name: _______________________________________________________
Account #: _______________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a different
Ivy fund account.
Fund name: _______________________________________________________
Account #: _______________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $__________ for each time period indicated below and invest
my bank proceeds into the following Ivy fund:
Fund name:__________________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: _________________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of___________________).
___ Semiannually (on the ___ day of the months of
_______________and______________).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($50 minimum) $----- for each time period indicated
below from the following Ivy Fund account:
Fund name: ________________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: ________________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___ Semiannually (on the _____ day of the months of
______________ and ________________).
___ Quarterly (on the ____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ____day
___ twice per month on the ____ days
___ 3 times per month on the ____ days
___ 4 times per month on the ____ days
3. I request the withdrawal proceeds be:
____ sent to the address listed in the registration
____ sent to the special payee listed in section 7A or 7B.
____ invested into additional shares of the same class of a
different Ivy fund:
Fund name:__________________________________________________________
Account #: _________________________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual ______________________________________________
Account # (if applicable) _______________________________________________
Street __________________________________________________________________
City __________________________________________ State ________ Zip ______
B. FED WIRE/EFT INFORMATION
Financial institution ___________________________________________________
ABA # ___________________________________________________________________
Account # _______________________________________________________________
Street __________________________________________________________________
City _________________________________________ State _________ Zip ______
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
__________________________________________ _____________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
DETACH ON PERFORATION TO MAIL
(Remember to sign Section 8)
<PAGE> 95
* Symbol not assigned as of this printing.
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Ivy European Opportunities Fund - Class A * 465898815
Ivy European Opportunities Fund - Class B * 465898823
Ivy European Opportunities Fund - Class C * 465898831
Ivy European Opportunities Fund - Class I * 465898849
Ivy Global Fund - Class A MCGLX 465897742
Ivy Global Fund - Class B IVGBX 465897734
Ivy Global Fund - Class C IVGCX 465897593
Ivy Global Natural Resources Fund - Class A IGNAX 465897429
Ivy Global Natural Resources Fund - Class B IGNBX 465897411
Ivy Global Natural Resources Fund - Class C IGNCX 465897395
Ivy Global Science & Technology Fund - Class A IVTAX 465897544
Ivy Global Science & Technology Fund - Class B IVTBX 465897536
Ivy Global Science & Technology Fund - Class C IVTCX 465897528
Ivy Global Science & Technology Fund - Class I IVSIX 465897510
Ivy International Fund II - Class A IVIAX 465897353
Ivy International Fund II - Class B IIFBX 465897346
Ivy International Fund II - Class C IVIFX 465897338
Ivy International Fund II - Class I * 465897320
Ivy International Small Companies Fund - Class A IYSAX 465897460
Ivy International Small Companies Fund - Class B IYSBX 465897452
Ivy International Small Companies Fund - Class C IYSCX 465897445
Ivy International Small Companies Fund - Class I IYSIX 465897437
Ivy Pan-Europe Fund - Class A * 465897387
Ivy Pan-Europe Fund - Class B * 465897379
Ivy Pan-Europe Fund - Class C * 465897361
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 96
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and the Funds' annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Funds' performance during its most recent fiscal year. The SAI and
the Funds' annual and semiannual reports are available upon request and
without charge from the Distributor at the following address and phone
number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and the annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
01INTLX0499
<PAGE> 97
[Ivy Funds Logo]
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 INTERNATIONAL EQUITY FUNDS ADVISOR CLASS SHARES
IVY EUROPEAN OPPORTUNITIES 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 Fund is a registered open-end investment company consisting
of nineteen separate portfolios. This Prospectus relates to the
Advisor Class shares of the seven funds listed above (the
"Funds"). The Funds also offer Class A, Class B and Class C
shares (and Class I shares in the case of Ivy European
Opportunities Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II and Ivy International Small Companies
Fund), which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary
is a criminal offense. Investments in the Funds are not deposits
of any bank and are not federally insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
- -- CONTENTS
2 Ivy European Opportunities Fund
4 Ivy Global Fund
6 Ivy Global Natural Resources Fund
8 Ivy Global Science & Technology
Fund
10 Ivy International Fund II
12 Ivy International Small Companies
Fund
14 Ivy Pan-Europe Fund
16 Additional information
about investment strategies
and risks
20 Management
23 Shareholder information
27 Financial highlights
29 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[Mackenzie Logo]
<PAGE> 98
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY EUROPEAN
OPPORTUNITIES FUND
- -- INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital growth by investing in the
securities markets of Europe.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in the equity
securities of European companies, which may include:
- - companies operating in Europe's emerging markets;
- - small-capitalization companies in the more developed markets of Europe; and
- - large European companies, or European companies of any size that provide
special investment opportunities (such as privatized companies or those
providing exceptional value).
The Fund may also invest in European debt securities, up to 20% of which may be
low-rated (commonly referred to as "high yield" or "junk" bonds).
The Fund's manager uses a "bottom-up" investment approach, focusing on prospects
for long term earnings growth.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger, more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction costs
in smaller company stocks may also be higher than those of larger companies.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment, even where "management risk" is
not a factor.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Certain of the Fund's debt
security holdings may be considered below investment grade (commonly referred to
as "high yield" or "junk" bonds). Low-rated debt securities are considered
speculative and could weaken the Fund's returns if the issuer defaults on its
payment obligations.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
2
<PAGE> 99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EURO CONVERSION RISK: On January 1, 1999, a new European currency called
the "euro" was introduced and adopted for use by eleven European countries.
The transition to daily usage of the euro will occur during the period from
January 1, 1999 through December 31, 2001, at which time euro bills and
coins will be put into circulation. Certain European Union members,
including the United Kingdom, did not officially implement the euro on
January 1, 1999 and may cause market disruptions when and if they decide to
do so. Should this occur, the Fund could experience investment losses.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth
potential, but who can accept moderate fluctuations in capital value in the
short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
-- PERFORMANCE INFORMATION
The Fund commenced operations on May 3, 1999, therefore no information is
available.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)................................... none
Maximum deferred sales charge (load) (as
a percentage of purchase price).......... none
Maximum sales charge (load) imposed on
reinvested dividends..................... none
Redemption fee*.......................... none
Exchange fee............................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 0.95%
Total annual Fund operating expenses*.... 1.95%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -------------
YEAR
- -------------
<S> <C>
1st $198
3rd 726
</TABLE>
3
<PAGE> 100
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
GLOBAL
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth. Any income realized will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
companies in at least three different countries, including the United States.
The Fund might engage in foreign currency exchange transactions and forward
foreign currency contracts to control its exposure to certain risks.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world. The Fund is expected to have some
emerging markets exposure in an attempt to achieve higher returns over the long
term.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
Since the Fund may invest a substantial portion of its assets in these
countries, it is exposed to the following additional risks:
- - securities that are even less liquid and more volatile than those in more
developed foreign countries;
- - unusually long settlement delays;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - abrupt changes in exchange rate regime or monetary policy;
- - unusually large currency fluctuations and currency conversion costs; and
- - high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
4
<PAGE> 101
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on April 18, 1991 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'92 2.74%
'93 29.63%
'94 -4.6%
'95 12.08%
'96 16.21%
'97 -8.72%
'98 8.59%
</TABLE>
Best quarter Q4 '98: 24.15%
Worst quarter Q3 '98: (20.47%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
--------------------------
WORLD EAFE EMF
CLASS A INDEX INDEX INDEX
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................................... 8.59% 24.34% 20.00% (25.34%)
Past 5 years................................................ 4.26% 15.68% 9.19% (9.27%)
Since inception*............................................ 7.61% 13.03% 8.44% 5.10%
</TABLE>
*Index performance is calculated from April 30, 1991.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price).................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price)............. none
Maximum sales charge (load) imposed on
reinvested dividends...................... none
Redemption fee*........................... none
Exchange fee.............................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management fees*......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 1.11%
Total annual Fund operating expenses..... 2.11%
Expenses reimbursed**.................... 0.36%
Net Fund operating expenses**............ 1.75%
</TABLE>
*Management fees are reduced to 0.75% for net assets over $500
million.
**The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 178
3rd 666
5th 1,180
10th 2,593
</TABLE>
5
<PAGE> 102
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY GLOBAL
NATURAL
RESOURCES FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth. Any income realized will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in equity securities.
The Fund's manager seeks to maximize the Fund's returns by seeking out natural
resources companies of any size with strong management and financial positions,
adding balance with established low cost, low debt producers and positions that
are based on anticipated commodity price trends. For these purposes, "natural
resources" generally include:
- - precious metals (such as gold, silver and platinum);
- - ferrous and nonferrous metals (such as iron, aluminum, copper and steel);
- - strategic metals (such as uranium and titanium);
- - fossil fuels and chemicals;
- - forest products and agricultural commodities; and
- - undeveloped real property.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger, more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction costs
in smaller company stocks may also be higher than those of larger companies.
NATURAL RESOURCES AND PHYSICAL COMMODITIES RISK: Investing in natural resources
can be riskier than other types of investment activities because of a range of
factors, including:
- - price fluctuations caused by real and perceived inflationary trends and
political developments; and
- - the costs assumed by natural resource companies in complying with
environmental and safety regulations.
Investing in physical commodities, such as gold, exposes the Fund to other risk
considerations, such as:
- - potentially severe price fluctuations over short periods of time;
- - storage costs that can exceed the custodial and/or brokerage costs associated
with the Fund's other portfolio holdings.
INDUSTRY-CONCENTRATION RISK: Since the Fund can invest a significant portion of
its assets in securities of companies engaged in natural resources activities,
the Fund could experience wider fluctuations in value than funds with more
diversified portfolios.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept potentially dramatic fluctuations in capital value in the
short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 1, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
[CHART]
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'97 6.95%
'98 -29.35%
</TABLE>
Best quarter Q3 '97: 19.66%
Worst quarter Q4 '97: (23.28%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
COMMODITY-
RELATED
CLASS A INDEX
----------------------------------------------------------------------------------
<S> <C> <C>
Past year................................................... (29.35%) (14.61%)
Since inception............................................. (13.11%) (9.65%)
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering
price)...................................................... none
Maximum deferred sales charge (load) (as a percentage of
purchase price)............................................. none
Maximum sales charge (load) imposed on reinvested
dividends................................................... none
Redemption fee*............................................. none
Exchange fee................................................ none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 4.50%
Total annual Fund operating expenses..... 5.50%
Expenses reimbursed*..................... 3.53%
Net Fund operating expenses*............. 1.97%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 200
3rd 732
5th 1,291
10th 2,814
</TABLE>
7
<PAGE> 104
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY GLOBAL
SCIENCE & TECHNOLOGY
FUND
- -- INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital growth. Any income realized
will be incidental.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in equity securities
of companies throughout the world that are expected to profit from the
development, advancement and use of science and technology.
Industries that are likely to be represented in the Fund's portfolio holdings
include:
- - internet;
- - computers and peripheral products;
- - software;
- - electronic components and systems; and
- - telecommunications, media and information services.
The Fund's management team believes that technology is a fertile growth area,
and actively seeks to position the Fund to benefit from this growth by investing
in companies of any size that may deliver rapid earnings growth and potentially
high returns.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Many of the companies in which the Fund may
invest have 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, since smaller companies
tend to be thinly traded because they are subject to greater business risk.
Transaction costs in smaller-company stocks may also be higher than those of
larger companies.
INDUSTRY-CONCENTRATION RISK: Since the Fund focuses its investments in
securities of companies engaged in the science and technology industries, the
Fund could experience wider fluctuations in value than funds with more
diversified portfolios. For example, rapid advances in these industries tend to
cause existing products to become obsolete, and the Fund's returns could suffer
to the extent it holds an affected company's shares. Companies in a number of
science and technology industries are also subject to government regulations and
approval processes that may affect their overall profitability and cause their
stock prices to be more volatile.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
8
<PAGE> 105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on July 22, 1996 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
(CHART)
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'97 6.53%
'98 35.26%
</TABLE>
Best quarter Q4 '98: 39.16%
Worst quarter Q1 '97: (19.15%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RUSSELL 2000
TECHNOLOGY
CLASS A INDEX
- --------------------------------------------------------------------------------------
<S> <C> <C>
Past year................................................... 35.26% 20.57%
Since inception*............................................ 42.30% 15.12%
</TABLE>
*Index performance is calculated from July 30, 1996.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)................................... none
Maximum deferred sales charge (load) (as
a percentage of purchase price........... none
Maximum sales charge (load) imposed on
reinvested dividends..................... none
Redemption fee*.......................... none
Exchange fee............................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 1.18%
Total annual Fund operating expenses..... 2.18%
</TABLE>
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ------------------
YEAR
- ------------------
<S> <C>
1st $ 221
3rd 682
5th 1,169
10th 2,513
</TABLE>
9
<PAGE> 106
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
FUND II
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests at least 65% of its assets in equity securities principally
traded in European, Pacific Basin and Latin American markets.
To control its exposure to certain risks, the Fund might engage in foreign
currency exchange transactions and forward foreign currency contracts.
The Fund's manager uses a disciplined value approach while looking for
investment opportunities around the world.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
10
<PAGE> 107
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on May 13, 1997 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
[CHART]
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'98 6.63%
</TABLE>
Best quarter Q4 '98: 16.49%
Worst quarter Q3 '98: (18.29%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MORNINGSTAR LIPPER
CATEGORY FOR CATEGORY FOR
MSCI EAFE INTERNATIONAL INTERNATIONAL
CLASS A INDEX STOCK FUNDS STOCK FUNDS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................................... 6.63% 20.00% 12.26% 13.02%
Since inception*............................................ (2.68%) 9.40% 5.88% 6.43%
</TABLE>
*MSCI EAFE Index performance is calculated from May 30, 1997. Morningstar
performance is calculated from June 1, 1997. Lipper performance is
calculated from May 15, 1997.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price).................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price)............. none
Maximum sales charge (load) imposed on
reinvested dividends...................... none
Redemption fee*........................... none
Exchange fee.............................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 0.45%
Total annual Fund operating expenses..... 1.45%
Expenses reimbursed*..................... 0.13%
Net Fund operating expenses*............. 1.32%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.50% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 134
3rd 628
5th 1,149
10th 2,579
</TABLE>
11
<PAGE> 108
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
SMALL COMPANIES FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth. Consideration of current income is secondary to
this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the common stock of foreign
issuers having total market capitalization of less than $1 billion.
The Fund might engage in foreign currency exchange transactions and forward
foreign currency contracts to control its exposure to certain risks.
The Fund is managed by a team that focuses on both value and growth factors.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL COMPANY RISK: Securities of smaller companies may be subject to more
abrupt or erratic market movements than the securities of larger, more
established companies, since they tend to be thinly traded and because the
companies are subject to greater business risk. Transaction costs in
smaller-company stocks may also be higher than those of larger companies.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept significant fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
12
<PAGE> 109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 1, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
[CHART]
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'97 -12.52%
'98 5.24%
</TABLE>
Best quarter Q1 '98: 17.44%
Worst quarter Q3 '98: (14.96%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HSBC JAMES
CAPEL WORLD
(EX-US) SMALL
CLASS A COMPANY INDEX
--------------------------------------------------------------------------------------
<S> <C> <C>
Past year................................................... 5.24% 3.31%
Since inception............................................. (4.06%) (5.13%)
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)............................... none
Maximum deferred sales charge (load)(as a percentage of
purchase price)............................................. none
Maximum sales charge (load) imposed on reinvested
dividends................................................... none
Redemption fee*............................................. none
Exchange fee................................................ none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management fees......................... 1.00%
Distribution and/or service (12b-1)
fees.................................... none
Other expenses.......................... 4.88%
Total annual Fund operating expenses.... 5.88%
Expenses reimbursed*.................... 3.91%
Net Fund operating expenses*............ 1.97%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE:
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 200
3rd 731
5th 1,289
10th 2,810
</TABLE>
13
<PAGE> 110
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
PAN-EUROPE
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of large
and medium-sized European companies.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
EURO CONVERSION RISKS: On January 1, 1999, a new European currency called the
"euro" was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from January
1, 1999 through December 31, 2001, at which time euro bills and coins will be
put in circulation. Certain European Union members, including the United
Kingdom, did not officially implement the euro on January 1, 1999 and may cause
market disruptions when and if they decide to do so. Should this occur, the Fund
could experience investment losses.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
14
<PAGE> 111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides
some indication of the risks of investing in the Fund by showing changes in
the Fund's performance from year to year and how the Fund's average annual
returns since its inception on May 13, 1997 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
(CHART)
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'97 5.54%
'98 6.72%
</TABLE>
Best quarter Q1 '98: 17.61%
Worst quarter Q3 '98: (21.25%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MORNINGSTAR
MSCI EUROPE EUROPE STOCK
CLASS A INDEX UNIVERSE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Past year................................................... 6.72% 24.50% 18.97%
Since inception*............................................ 7.55% 23.66% 17.10%
</TABLE>
*MSCI Europe Index performance is calculated from May 30, 1997. Morningstar
performance is calculated from June 1, 1997.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)................................... none
Maximum deferred sales charge (load)(as a
percentage of purchase price)............ none
Maximum sales charge (load) imposed on
reinvested dividends..................... none
Redemption fee*.......................... none
Exchange fee............................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees.......................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 4.48%
Total annual Fund operating expenses..... 5.48%
Expenses reimbursed*..................... 3.37%
Net Fund operating expenses*............. 2.11%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $ 214
3rd 774
5th 1,360
10th 2,950
</TABLE>
15
<PAGE> 112
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY EUROPEAN OPPORTUNITIES FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing primarily in the equity
securities of companies located or otherwise doing business in European
countries and covering a broad range of economic and industry sectors. The Fund
may also invest a significant portion of its assets in debt securities, up to
20% of which is considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). The Fund's manager follows a "bottom-up" approach to
investing, which focuses on prospects for long-term earnings growth. Company
selection is generally based on an analysis of a wide range of indicators (such
as growth, earnings, cash, book and enterprise value), as well as factors such
as market position, competitive advantage and management strength. Country and
sector allocation decisions are driven by the company-selection process.
IVY GLOBAL FUND: The Fund seeks to achieve its principal objective of long-term
capital growth by investing primarily in the equity securities of companies
throughout the world. The Fund invests in a variety of economic sectors,
industry segments and individual securities to reduce the effects of price
volatility in any one area, and normally invests its assets in at least three
different countries (including the United States). Countries are selected on the
basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund seeks to achieve its principal
objective of long-term growth by investing primarily in the equity securities of
companies throughout the world that own, explore or develop natural resources
and other basic commodities (or that supply goods and services to such
companies). The Fund's manager targets for investment well managed companies
that are expected to increase shareholder value through successful exploration
and development of natural resources, balancing the Fund's portfolio with low
cost, low debt producers that have outstanding asset bases, and positions that
are based on anticipated commodity price trends. Additional emphasis is placed
on sectors that are out of favor but appear to offer the most significant
recovery potential over a one to three year period. All investment decisions are
reviewed systematically and cash reserves may be allowed to build up when
valuations seem unattractive. The manager attempts to minimize risk through
diversifying the Fund's portfolio by commodity, country, issuer and asset class.
Typically the Fund's top 50 investments comprise more than 80% of the Fund's
assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing in the common stock of
companies that are expected to benefit from the development, advancement and use
of science and technology. The Fund may also invest in companies that are
expected to benefit indirectly from the commercialization of technological and
scientific advances. Industries likely to be represented in the Fund's overall
portfolio holdings include internet, computers and peripheral products,
software, electronic components and systems, telecommunications, and media and
information services. Rapid advances in these industries in recent years have
stimulated unprecedented growth. While this is no guarantee of future
performance, the Fund's management team believes that these industries offer
substantial opportunities for long-term capital appreciation. The Fund intends
to invest its assets in at least three different countries, but may at any given
time have a substantial portion of its assets invested in the United States.
IVY INTERNATIONAL FUND II: The Fund seeks to achieve its principal objective of
long-term capital growth by investing in equity securities principally traded in
European, Pacific Basin and Latin American markets. The Fund invests in a
variety of
16
<PAGE> 113
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
economic sectors and industry segments to reduce the effects of price volatility
in any one area. The Fund's manager seeks out rapidly expanding foreign
economies and companies that generally have at least $1 billion in
capitalization at the time of investment and a solid history of operations.
Other factors that the Fund's manager considers in selecting particular
countries include long-term economic growth prospects, anticipated inflation
levels, and the effect of applicable government policies on local business
conditions. The Fund is managed using a value approach, which focuses on
financial ratios such as price/earnings, price/book value, price/cash flow,
dividend yield and price/replacement cost. Typically the securities purchased
are attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing in the foreign stock markets,
focusing on issuers that are valued at less than $1 billion across a wide range
of geographic, economic and industry sectors. Countries are selected on the
basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
IVY PAN-EUROPE FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the equity securities of
companies located or otherwise doing business in European countries and that
cover a broad range of economic and industry sectors. The Fund may also invest a
significant portion of its assets outside of Europe. Countries are selected on
the basis of a mix of factors that include long-term economic growth prospects,
anticipated inflation levels, and the effect of applicable government policies
on local business conditions. The Fund is managed using a value approach, which
focuses on financial ratios such as price/earnings, price/book value, price/cash
flow, dividend yield and price/replacement cost. Typically the securities
purchased are attractively valued on one or more of these measures relative to a
broad universe of comparable securities.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: The table on the following page identifies the investment
techniques that each Fund's advisor considers important in achieving the Fund's
investment objective or in managing its exposure to risk (and that could
therefore have a significant effect on a Fund's returns). Following the table is
a description of the general risk characteristics of these investment
techniques. Other investment methods that the Funds may use (such as derivative
investments), but that are not likely to play a key role in their overall
investment strategies, are described in the Funds' Statement of
17
<PAGE> 114
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
Additional Information (see back cover page for information on how you can
receive a free copy).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
INVESTMENT
TECHNIQUE: IEOF IGF IGNRF IGSTF IIF2 IISCF IPEF
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stocks........ X X X X X X X
Debt securities...... X
Low-rated debt
securities........... X
Foreign securities... X X X X X X X
Emerging markets..... X X X X X X X
Foreign currencies... X X X X X X X
Depository receipts.. X X X X X X X
Derivatives.......... X X
Illiquid
securities........... X X X X X X X
Precious metals...... X
Borrowing............ X X X X X X X
Temporary defensive
positions............ X X X X X X X
</TABLE>
RISK CHARACTERISTICS:
- - COMMON STOCKS: Common stocks represent a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - 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. For example, 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. A Fund's portfolio is therefore susceptible to the decline in
value of the debt instruments it holds in a rising interest rate environment.
The market value of debt securities also tends to vary according to the
relative financial condition of the issuer. Bonds with longer maturities tend
to be more volatile than bonds with shorter maturities.
- - LOW-RATED DEBT SECURITIES: In general, low-rated debt securities (commonly
referred to as "high yield" or "junk" 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.
For this reason, these bonds are considered speculative and could
significantly weaken a Fund's returns.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect a Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets. Many of the Funds' securities also are
denominated in foreign currencies and the value of each Fund's investments, as
measured in U.S. dollars, may be affected favorably or unfavorably by changes
in foreign currency exchange rates and exchange control regulations. Currency
conversions can also be costly.
Other factors that can affect the value of a Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that
many foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards. It may also be difficult to obtain reliable
information about the securities and business operations of certain foreign
issuers. Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
- securities that are even less liquid and more volatile than those in more
developed foreign countries;
18
<PAGE> 115
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- increased settlement delays;
- unusually high inflation rates (which in extreme cases can cause the value of
a country's assets to erode sharply);
- unusually large currency fluctuations and currency conversion costs; and
- high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DEPOSITORY RECEIPTS: Interests in foreign issuers may be acquired in the form
of sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs") and similar types of depository receipts. ADRs
typically are issued by a U.S. bank or trust company and represent ownership
of the underlying securities issued by a foreign corporation. GDRs and other
types of depository receipts are usually issued by foreign banks or trust
companies. The investing Fund's investments in ADRs, GDRs and other depository
receipts are viewed as investments in the underlying securities.
Depository receipts can be difficult to price and are not always
exchange-listed. Unsponsored depository programs also are organized
independently 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.
- - DERIVATIVE INVESTMENT TECHNIQUES: A Fund may, but is not required to, use
certain derivative investment techniques to hedge various market risks (such
as interest rates, currency exchange rates and broad or specific market
movements) or to enhance potential gain. Among the derivative techniques a
Fund might use are options, futures, forward foreign currency contracts and
foreign currency exchange transactions.
Using put and call options could cause a Fund to lose money by forcing the
sale or purchase of portfolio securities at inopportune times or for prices
higher (in the case of put options) or lower (in the case of call options)
than current market values, by limiting the amount of appreciation the Fund
can realize on its investments, or by causing the Fund to hold a security it
might otherwise sell.
Futures transactions (and related options) involve other types of risks. For
example, the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of a Fund
could cause losses on the hedging instrument that are greater than gains in
the value of the Fund's position. In addition, futures and options markets may
not be liquid in all circumstances and certain over-the-counter options may
have no markets. As a result, a Fund might not be able to close out a
transaction before expiration without incurring substantial losses (and it is
possible that the transaction cannot even be closed). In addition, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium.
Foreign currency transactions (such as forward foreign currency contracts) can
cause investment losses in a variety of ways. For example, changes in currency
exchange rates may result in poorer overall performance for a Fund than if it
had not engaged in such transactions. There may also be an imperfect
correlation between a Fund's portfolio holdings of securities denominated in a
particular currency and the forward contracts entered into by the 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.
- - ILLIQUID SECURITIES: "Illiquid securities" are assets that may not be disposed
of in the ordinary course of business within seven days at roughly the value
at which the investing fund has valued the assets. These may be "restricted
securities," which cannot be sold to the public without registration under the
Securities Act of 1933 (in the absence of an exemption) or because of other
legal or contractual restrictions on resale. Thus, while illiquid securities
may
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INTERNATIONAL EQUITY FUNDS
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offer the potential for higher returns than more readily marketable
securities, there is a risk that the investing fund will not be able to
dispose of them promptly at an acceptable price.
- - PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES: Ivy Global Natural Resources
Fund can invest in precious metals and other physical commodities. Commodities
trading is generally considered speculative because of the significant
potential for investment loss. Among the factors that could affect the value
of the Fund's investments in commodities are cyclical economic conditions,
sudden political events and adverse international monetary policies. Markets
for precious metals and other commodities are likely to be volatile and there
may be sharp price fluctuations even during periods when prices overall are
rising. The Fund may also pay more to store and accurately value its commodity
holdings than it does with its other portfolio investments.
- - BORROWING: For temporary or emergency purposes, Ivy Global Fund, Ivy Global
Science & Technology Fund and Ivy International Fund II may borrow up to 10%
of the value of its total assets from qualified banks. Ivy European
Opportunities Fund, Ivy Global Natural Resources Fund, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund may borrow up to one third of the value
of their total assets from qualified banks, but (with the exception of Ivy
European Opportunities Fund) will not buy securities whenever its outstanding
borrowings exceed 10% of the value of its total assets. Borrowing may
exaggerate the effect on a Fund's share value of any increase or decrease in
the value of the securities it holds. Money borrowed will also be subject to
interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: A Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective. Its exposure to the risks associated with debt securities would
also be heightened (see "Debt Securities, in General" on page 18).
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: The Funds may have investments in Europe. On January 1,
1999, a new European currency called the "euro" was introduced and adopted for
use by eleven European countries. The transition to daily usage of the euro will
occur during the period from January 1, 1999 through December 31, 2001, at which
time euro bills and coins will be put into circulation. Certain European Union
members, including the United Kingdom, did not officially implement the euro on
January 1, 1999 and may cause market disruptions when and if they decide to do
so. Should this occur, a Fund could experience investment losses.
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc.("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides business management services to the Funds and investment advisory
to all Funds other than Ivy Global Natural Resources Fund. IMI is an
SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other twelve series of Ivy
20
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- --------------------------------------------------------------------------------
Fund. For the Funds' fiscal year ending December 31, 1998, the Funds (other than
Ivy European Opportunities Fund) each paid IMI a fee that was equal to 1.00% of
the Funds' respective average net assets. Ivy European Opportunities Fund will
pay IMI a fee equal to 1.00% of the Fund's average net assets.
Henderson Investment Management Limited ("Henderson"), 3 Finsbury Avenue,
London, England EC2M 2PA, serves as subadviser to Ivy European Opportunities
Fund under an Agreement with IMI. For its services, Henderson receives a fee
from IMI that is equal, on an annual basis, to 0.50% of the Fund's average net
assets. As of February 1, 1999, Henderson also serves as subadviser with respect
to 50% of the net assets of Ivy International Small Companies Fund, for which
Henderson receives a fee from IMI that is equal, on an annual basis, to 0.50% of
that portion of the Fund's assets that Henderson manages. Henderson is an
indirect, wholly owned subsidiary of AMP Limited, an Australian life insurance
and financial services company located in New South Wales, Australia.
Mackenzie Financial Corporation ("MFC"), 150 Bloor Street West, Suite 400,
Toronto, Ontario, Canada M5S 3B5, serves as the investment adviser to Ivy Global
Natural Resources Fund and is responsible for selecting the Fund's portfolio
investments. MFC has been an investment counsel and mutual fund manager in
Toronto for more than 30 years, and has over $17.8 billion in assets under
management. For the Fund's fiscal year ending December 31, 1998, the Fund paid
to MFC an aggregate fee equal to 0.50% of the Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY EUROPEAN OPPORTUNITIES FUND: Stephen Peak, Executive Director of Henderson
and head of Henderson's European equities team, is primarily responsible for
selecting the Fund's portfolio of investments. Formerly a director and portfolio
manager with Touche Remnant & Co., Mr. Peak has 24 years of investment
experience.
IVY GLOBAL FUND: Barbara Trebbi, a Senior Vice President of IMI, manages the
foreign portion of the Fund's portfolio. She is also Managing Director of
International Equities and a member of the Ivy international portfolio
management team. Ms. Trebbi joined IMI in 1988 and has 11 years of professional
investment experience. She is a Chartered Financial Analyst and holds a graduate
diploma from the London School of Economics. Paul P. Baran, a Senior Vice
President of IMI, manages the domestic portion of the Fund's portfolio. Before
joining IMI, Mr. Baran was Senior Vice President/Chief Investment Officer of
Central Fidelity National Bank. He has 24 years of professional investment
experience and is a Chartered Financial Analyst. He has an MBA from Wayne State
University.
IVY GLOBAL NATURAL RESOURCES FUND: Frederick Sturm, a Senior Vice President of
MFC, has managed the Fund since its inception. Mr. Sturm joined MFC in 1983 and
has 14 years of professional investment experience. He is a Chartered Financial
Analyst and holds a graduate degree in commerce and finance from the University
of Toronto.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund is managed by IMI's Global
Technology Team. James W. Broadfoot, President of IMI and a Vice President of
Ivy Fund, is the Team's lead manager. Before joining IMI in 1990, Mr. Broadfoot
was the principal in an investment counsel firm specializing in emerging growth
companies. He has over 25 years of professional investment experience, holds an
MBA from the Wharton School of Business and is a Chartered Financial Analyst.
IVY INTERNATIONAL FUND II: Barbara Trebbi, a Senior Vice President of IMI, has
managed the Fund since its inception. She is also Managing Director of
International Equities and a member of the Ivy international portfolio
management team. Ms. Trebbi joined IMI in 1988 and has 11 years of professional
investment experience. She is a Chartered Financial Analyst and holds a graduate
diploma from the London School of Economics.
Ms. Trebbi is supported by a team of research analysts who are responsible for
providing information on regional and country-specific economic and political
developments and monitoring individual companies. These analysts use a variety
of research sources that include:
- - brokerage reports;
- - economic and financial news services;
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund is managed using a team
approach. IMI's international equity team is comprised of investment
professionals and is supported by research analysts who acquire information on
regional and country-specific economic and political developments and monitor
individual companies. These analysts use a variety of research sources that
include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
The Henderson team's investment process combines top down regional allocation
with a bottom up stock selection approach. Regional allocations are based on
factors such as interest rates and current economic cycles, which are used to
identify economies with relatively strong prospects for real economic growth.
Individual stock selections are based largely on prospects for earnings growth.
IVY PAN-EUROPE FUND: The Fund is managed by a team of investment professionals
that is supported by research analysts who acquire information on regional and
country-specific economic and political developments and monitor individual
companies. These analysts use a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
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- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that
is listed or traded on a
recognized stock exchange is
valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value next determined after your instructions are received in
proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's transfer agent)
or by your registered securities dealer. Since the Funds normally invest in
securities that are listed on foreign exchanges that may trade on weekends or
other days when the Funds do not price their shares, each Fund's share value may
change on days when shareholders will not be able to purchase or redeem the
Fund's shares.
- -- HOW TO BUY SHARES
Please read these sections below carefully before investing.
Advisor Class shares are offered through this Prospectus only to the following
investors:
- - trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- - 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 his
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 0.50%
on the assets in the account;
- - officers and Trustees of the Ivy Fund (and their relatives);
- - directors or employees of Mackenzie Investment Management Inc. or its
affiliates;
- - 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.)
The following investment minimums, sales charges and expenses apply.
<TABLE>
<S> <C>
- --------------------------------------------------
Minimum initial investment*.............. $10,000
Minimum subsequent investment*........... $250
Initial sales charge..................... none
CDSC..................................... none
Service and distribution fees............ none
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
Fund in which you wish to invest. You should note on the check that you wish to
invest in Advisor Class shares (see page 23 for minimum initial investments.)
Deliver your application materials to your registered representative or selling
broker, or send them to one of the addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- -BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 6B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required. When you redeem, IMSC will normally send redemption proceeds to
you on the next business day, but may take up to seven days (or longer in the
case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
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- --------------------------------------------------------------------------------
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - 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, unless you instruct otherwise.
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 24 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain Funds) or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will be mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay
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dividends annually. The Funds will distribute net investment income and net
realized capital gains, if any, at least once a year. The Funds 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 Internal Revenue Code of 1986, as amended (the
"Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by a Fund during January of the
following calendar year. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by your
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Funds
under applicable state or local law.
26
<PAGE> 123
27
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance and reflects results for a single Fund share.
Ivy European Opportunities Fund commenced operations on May 3, 1999, and as
of December 31, 1998 Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund had not issued any Advisor Class shares.
Accordingly, no financial information is presented for these Funds. The
total returns in the table represent the rate an investor would have earned
(or lost) on an investment in a Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, is included in its Annual Report to shareholders (which is
available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY GLOBAL FUND ADVISOR CLASS
-------------------------
for the period
April 30, 1998
(Commencement)
to December 31,
- ------------------------------------------------------------------------------------------
1998
SELECTED PER SHARE DATA -------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $ 13.26
-------------------------
Loss from investment operations
Net investment income (a)................................ .05
Net gains or losses on securities (both realized and
unrealized)............................................ (1.41)
-------------------------
Total from investment operations......................... (1.36)
-------------------------
Less distributions
Distributions from capital gains......................... .54
-------------------------
Total distributions.................................... .54
-------------------------
Net asset value, end of period............................. $ 11.36
=========================
Total return (%)(b)........................................ (10.19)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 321
Ratio of expenses to average net assets
With expense reimbursement (%)(c)........................ 1.75
Without expense reimbursement (%)(c)..................... 2.11
Ratio of net investment income to average net assets
(%)(a)(c)................................................ .59
Portfolio turnover rate (%)................................ 17
</TABLE>
(a) Net investment
income is net of
expenses reimbursed by
Manager.
(b) Total return repre-
sents aggregate total
return and does not
reflect a sales charge.
(c) Annualized
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR CLASS
IVY GLOBAL SCIENCE & -------------------------
TECHNOLOGY FUND FOR THE PERIOD
April 15, 1998
(Commencement)
to December 31,
- ------------------------------------------------------------------------------------------
1998
SELECTED PER SHARE DATA -------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $20.19
-------------------------
Income from investment operations
Net investment loss (c).................................. (.20)
Net gains or losses on securities (both realized and
unrealized)(c)......................................... 3.63
-------------------------
Total from investment operations......................... 3.43
-------------------------
Net asset value, end of period............................. $23.62
=========================
Total return (%)(a)........................................ 16.99
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 15
Ratio of expenses to average net assets
Without expense reimbursement (%)(b)..................... 2.18
Ratio of net investment loss to average net assets
(%)(b)................................................... (1.91)
Portfolio turnover rate (%)................................ 73
</TABLE>
(a) Total return repre-
sents aggregate total
return and does not
reflect a sales charge.
(b) Annualized
(c) Based on average
shares outstanding.
<PAGE> 124
28
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<TABLE>
<CAPTION>
IVY INTERNATIONAL FUND II ADVISOR CLASS
-------------------------
for the period
February 23, 1998
(Commencement)
to December 31,
- ------------------------------------------------------------------------------------------
1998
SELECTED PER SHARE DATA -------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $9.63
-------------------------
Loss from investment operations
Net investment income (a)................................ .11
Net gains or losses on securities (both realized and
unrealized)............................................ (.13)
-------------------------
Total from investment operations......................... (.02)
-------------------------
Less distributions
Dividends from net investment income..................... .11
Distributions from capital gains......................... .02
-------------------------
Total distributions.................................... .13
-------------------------
Net asset value, end of period............................. $9.48
=========================
Total return (%)(b)........................................ (.15)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 510
Ratio of expenses to average net assets
With expense reimbursement (%)(c)........................ 1.32
Without expense reimbursement (%)(c)..................... 1.45
Ratio of net investment income to average net assets
(%)(a)(c)................................................ 1.23
Portfolio turnover rate (%)................................ 16
</TABLE>
(a) Net investment
income is net of expenses
reimbursed by manager.
(b) Total return represents
aggregate total return and
does not reflect a sales
charge.
(c) Annualized
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY PAN-EUROPE FUND ADVISOR CLASS
-------------------------
for the period
March 23, 1998
(Commencement)
to December 31,
- ------------------------------------------------------------------------------------------
1998
SELECTED PER SHARE DATA -------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $12.31
-------------------------
Loss from investment operations
Net investment loss (a)(e)............................... (.01)
Net gains or losses on securities (both realized and
unrealized)(e)......................................... (1.02)
-------------------------
Total from investment operations......................... (1.03)
-------------------------
Net asset value, end of period............................. $11.28
=========================
Total return (%)(b)........................................ (8.37)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 65
Ratio of expenses to average net assets (d)
With expense reimbursement (%)(c)........................ 2.41
Without expense reimbursement (%)(c)..................... 5.78
Ratio of net investment loss to average net assets
(%)(a)(c)................................................ (.04)
Portfolio turnover rate (%)................................ 25
</TABLE>
(a) Net investment
loss is net of expenses
reimbursed by Manager.
(b) Total return represents
aggregate total return and
does not reflect a sales
charge.
(c) Annualized
(d) Total expenses include
fees paid indirectly, if any,
through an expense offset
arrangement.
(e) Based on average shares
outstanding.
<PAGE> 125
Account
Application
FUND USE ONLY
Account Number
Dealer/Branch/Rep
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to: USE FOR
ADVISOR
Ivy Mackenzie Services Corp., CLASS ONLY
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for
retirement accounts for which Ivy Fund (IBT) is
custodian.
1 REGISTRATION
Name -------------------------
-------------------------
-------------------------
Address -------------------------
City ---------- State ---------- Zip -------
Phone # (day) ( )
--------------------------------------------
Phone # (evening) ( )
--------------------------------------------
<TABLE>
<S> <C> <C>
-- Individual -- UGMA/UTMA -- Sole proprietor
-- Joint tenant -- Corporation -- Trust
-- Estate -- Partnership -- Other
------------------------------------
Date of trust --------------------------------- Minor's state of residence ---------------
</TABLE>
2 TAX I.D.
<TABLE>
<S> <C> <C>
Citizenship: -- U.S. -- Other (please specify): ----------
</TABLE>
Social security # ---- or Tax identification # ----
Under penalties of perjury, I certify by signing
in Section 8 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
"Dividends, distributions and taxes" 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 -------
Representative's
name ------------------------------------------------------------------
Representative's # -----Representative's phone # -----
Authorized signature of
dealer -----------------------------------------------------------------
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for
$ ---------- made payable to the appropriate
fund.
Please invest it in Advisor Class shares of
the following fund(s):
<TABLE>
<S> <C>
$ --------------- Ivy European Opportunities Fund $ --------------- Ivy International Fund II
$ --------------- Ivy Global Fund $ --------------- Ivy International Small Companies
$ --------------- Ivy Global Natural Resources Fund Fund
$ --------------- Ivy Global Science & Technology $ --------------- Ivy Pan-Europe Fund
Fund
</TABLE>
B. FOR DEALER USE ONLY
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: ------------------ ------------------ ------------------
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 126
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 account.
Fund name: --------------------
Account #: --------------------
B. --- Pay all dividends in cash and reinvest capital gains into
additional shares in this account or a different Ivy fund
account.
Fund name: --------------------
Account #: --------------------
C. --- Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: ----- the address listed in the registration
----- the special payee listed in Section 7A (by mail)
----- the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
--- I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $ ---------------- for each time period indicated below and
invest my bank proceeds in Advisor Class shares of the following Ivy
fund:
Fund name: --------------------
Account #: --------------------
2. Debit my bank account:
--- Annually (on the --- day of the month of
-----------------------).
--- Semiannually (on the --- day of the months of
--- and ---).
--- Quarterly (on the --- day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
--- Monthly*--- once per month on the --- day
--- twice per month on the ----- days
--- 3 times per month on the ----- days
--- 4 times per month on the ----- days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
--- I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($250 minimum) $----- for each time period indicated
below from the following Ivy Fund account:
Fund name: --------------------
Account #: --------------------
2. Withdraw from my Ivy Fund account:
--- Annually (on the ----- day of the month of
----------).
---Semiannually (on the ----- day of the months of
----- and -----).
--- Quarterly (on the ----- day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
--- Monthly*--- once per month on the --- day
--- twice per month on the ----- days
--- 3 times per month on the ----- days
--- 4 times per month on the ----- days
3. I request the withdrawal proceeds be:
--- sent to the address listed in the registration
--- sent to the special payee listed in section 7A or 7B.
--- invested into additional Advisor Class shares of a
different Ivy Fund:
Fund name: --------------------
Account #: --------------------
Note: A minimum balance of $10,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** --- yes --- no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** --- yes --- no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual ----------
Account # (if applicable) ----------
Street ----------
City ---------- State ----- Zip -----
B. FED WIRE/EFT INFORMATION
Financial institution ----------
ABA # ----------
Account # ----------
Street ----------
City ---------- State ----- Zip -----
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
---------------------------------------- --------------------
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ivy European Opportunities Fund - Advisor Class * 465898856
Ivy Global Fund - Advisor Class * 465897239
Ivy Global Natural Resources Fund - Advisor Class * 465897221
Ivy Global Science & Technology Fund - Advisor Class * 465897213
Ivy International Fund II - Advisor Class * 465897197
Ivy International Small Companies Fund - Advisor
Class * 465897189
Ivy Pan-Europe Fund - Advisor Class * 465897155
-------------------------------------------------------------------------------------------------------
* Symbol not assigned as of this printing
</TABLE>
<PAGE> 128
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and each Fund's annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Fund's performance during its most recent fiscal year. The SAI and
annual and semiannual reports are available upon request and without
charge from the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01INTLADV0499
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 129
[IVY FUNDS LOGO]
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 U.S. EQUITY FUNDS
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
Ivy Fund is a registered open-end investment
company consisting of nineteen separate
portfolios. This Prospectus relates to the
Class A, Class B and Class C shares of the
four funds listed above (the "Funds"), and
the Class I shares of Ivy US Blue Chip Fund.
The Funds also offer Advisor Class shares,
which are described in a separate
prospectus.
The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy
or accuracy of this Prospectus. Any
representation to the contrary is a
criminal offense.
Investments in the Funds are not
deposits of any bank and are not
federally insured or guaranteed by the
Federal Deposit Insurance Corporation or
any other government agency.
- -- CONTENTS
2 Ivy Growth Fund
4 Ivy Growth with Income Fund
6 Ivy US Blue Chip Fund
8 Ivy US Emerging Growth Fund
10 Additional information
about investment strategies
and risks
12 Management
13 Shareholder information
20 Financial highlights
25 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
Mackenzie Logo
<PAGE> 130
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
GROWTH
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth,
with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a wide spectrum of equity securities, including U.S.
companies of any size and large-cap international stocks.
The Fund's portfolio is divided into three segments, each of which is managed
according to the investment style of its portfolio manager (such as growth,
value or international).
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly even where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the Fund's stock
portfolio is not performing as well as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction
costs in smaller company stocks may also be higher than those of larger
companies.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are: - greater price volatility; - comparatively weak supervision and
regulation of securities exchanges, brokers and issuers; - higher brokerage
costs; - fluctuations in foreign currency exchange rates and related
conversion costs; - adverse tax consequences; and - settlement delays.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
2
<PAGE> 131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 12, 1960 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
(CHART)
<S> <C>
'89' 27.24%
'90' -3.76%
'91' 30.76%
'92' 5.21%
'93' 12.29%
'94' -2.79%
'95' 27.33%
'96' 17.22%
'97' 11.69%
'98' 14.05%
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q4 '98: 21.57%
Worst quarter Q3 '98: (17.04%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS* December 31, 1998
-----------------------------------------------------------------------
S&P 500 WILSHIRE
CLASS A CLASS B CLASS C INDEX 5000
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 7.50% 7.99% 11.72% 29.78% 21.72%
Past 5 years......... 11.70% 11.70% n/a 24.49% 19.43%
Past 10 years........ 12.65% n/a n/a 19.40% n/a
Since inception:
Class B**............ n/a 11.88% n/a 23.82% 18.79%
Class C**............ n/a n/a 10.67% 29.75% 22.98%
</TABLE>
*Performance figures reflect any applicable sales charges.
**The inception dates for the Fund's Class B and Class C shares were
October 22, 1993 and April 30, 1996, respectively.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- -----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................ 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)................ none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested
dividends............. none none none
Redemption fee*....... none none none
Exchange fee.......... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees*...... 0.85% 0.85% 0.85%
Distribution and/or
service (12b-1)
fees.................. 0.25% 1.00% 1.00%
Other expenses........ 0.28% 0.47% 0.68%
Total annual Fund
operating expenses.... 1.38% 2.32% 2.53%
</TABLE>
*Management Fees are reduced to 0.75% for net assets over $350
million.
- -------------------------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 707 $ 735 $ 235 $ 356 $ 256
3rd 987 1,024 724 788 788
5th 1,287 1,440 1,240 1,345 1,345
10th 2,137 2,421 2,421 2,866 2,866
</TABLE>
3
<PAGE> 132
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY GROWTH
WITH INCOME
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests almost exclusively in U.S. equity securities, a
number of which pay dividends.
Among the chief characteristics that the Fund's manager seeks in selecting
securities are:
- stock prices that appear low relative to the company's expected
profitability;
- financial security with capitalizations over $100 million; and
- more than three years of operating history.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly even where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the Fund's stock
portfolio is not performing as well as expected.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking relatively consistent
performance without the volatility of more aggressive growth funds.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of
the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns since
its inception on April 1, 1984 compare with those of a broad measure of
market performance. The Fund's past performance is not an indication of how
the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------
(CHART)
<S> <C>
'89' 18.06%
'90' -0.18%
'91' 36.33%
'92' 2.61%
'93' 15.07%
'94' -2.03%
'95' 24.93%
'96' 20.46%
'97' 21.57%
'98' 9.64%
</TABLE>
* Any applicable sales charges and account fees are not
reflected, and if they were the returns shown above
would be lower. The returns for the Fund's other
classes of shares during these periods were different
from those of Class A because of variations in their
respective expense structures.
# Grantham, Mayo Van Otterloo & Co. was subadviser to
the Fund from April 1, 1984 through June 30, 1989.
Best quarter Q4 '98: 17.92%
Worst quarter Q3 '98: (15.69%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
- -------------------------------------------------------------------------------
MORNINGSTAR
S&P MID-CAP
CLASS CLASS CLASS 500 WILSHIRE BLEND
A B C INDEX 5000 UNIVERSE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Past year............ 3.53% 4.01% 8.16% 29.78% 21.72% 9.31%
Past 5 years......... 13.16% 13.39% n/a 24.49% 19.43% 15.45%
Past 10 years........ 13.41% n/a n/a 19.40% n/a 14.75%
Since inception:
Class B*............. n/a 13.12% n/a 23.82% 18.79% 15.70%***
Class C**............ n/a n/a 15.82% 29.75% 22.98% 16.02%
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for the Fund's Class B shares was October 22, 1993.
**The inception date for the Fund's Class C shares was April 30, 1996.
***Since November 1, 1993.
4
<PAGE> 133
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering
price)......................... 5.75% none none
Maximum deferred sales charge
(load)(as a percentage of
purchase price)................ none 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends...................... none none none
Redemption fee*................ none none none
Exchange fee................... none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds wire,
a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -------------------------------------------------------
CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management fees........... 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1) fees...... 0.25% 1.00% 1.00%
Other expenses............ 0.60% 0.58% 0.52%
Total annual Fund
operating expenses........ 1.60% 2.33% 2.27%
- -------------------------------------------------------------------------
</TABLE>
- -- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 728 $ 736 $ 236 $ 330 $ 230
3rd 1,051 1,027 727 709 709
5th 1,396 1,445 1,245 1,215 1,215
10th 2,366 2,484 2,484 2,605 2,605
</TABLE>
5
<PAGE> 134
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
US BLUE
CHIP FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the common stocks of U.S. companies occupying
major market positions that are expected to be maintained or enhanced over
time (commonly known as "Blue Chip" companies).
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
The Fund's manager uses an equity style that focuses on both growth and
value.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well
as the securities held by other mutual funds with investment objectives that
are similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even
where "management risk" is not a factor, so you could lose money if you
redeem your Fund shares at a time when the Fund's stock portfolio is not
performing as well as expected.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
6
<PAGE> 135
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE INFORMATION
The Fund has been operating for less than a year, so no performance
information is available.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price).................. 5.75% none none none
Maximum deferred sales
charge (load) (as a
percentage of original
purchase price)......... none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption fee*......... none none none none
Exchange fee............ none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds wire,
a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees...... 0.75% 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1)
fees................. 0.25% 1.00% 1.00% none
Other expenses....... 5.34% 5.29% 5.38% 5.25%
Total annual Fund
operating expenses... 6.34% 7.04% 7.13% 6.00%
Expenses
reimbursed*.......... 4.91% 4.91% 4.91% 4.91%
Net Fund operating
expenses*............ 1.43% 2.13% 2.22% 1.09%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.15% of the Fund's
average net assets (excluding Rule 12b-1 fees and taxes). For each
of the following nine years, the Investment Manager will ensure
that these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 712 $ 716 $216 $325 $225 $111
3rd 1,218 1,192 892 919 919 579
</TABLE>
7
<PAGE> 136
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
US EMERGING
GROWTH FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of
small- and medium-sized U.S. companies that are in the early stages of their
life cycles and that the Fund's manager believes have the potential to
increase their sales and earnings at above-average rates.
Companies targeted for investment typically are in the early stages of their
life cycles and are believed by the Fund's manager to have the potential to
increase their sales and earnings at above-average rates.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even
where "management risk" is not a factor, so you could lose money if you
redeem your Fund shares at a time when the Fund's stock portfolio is not
performing as well as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of
larger more established companies, since smaller companies tend to be thinly
traded and because they are subject to greater business risk. Transaction
costs in smaller company stocks may also be higher than those of larger
companies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of
the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns since
it was first offered for sale to the public on April 30, 1993 compare with
those of a broad measure of market performance. The Fund's past performance
is not an indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -----------------------------------------------------------
(CHART)
<S> <C>
'94' 3.29
'95' 42.07
'96' 18.52
'97' 4.26
'98' 18.00
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if they
were the returns shown above would be lower. The returns for the Fund's other
classes of shares during these periods were different from those of Class A
because of variations in their respective expense structures.
Best quarter Q4 '98: 31.07%
Worst quarter Q3 '98: (17.82%)
8
<PAGE> 137
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
------------------------------------------------------------------------
RUSSELL
2000 MORNINGSTAR
GROWTH SMALL GROWTH
CLASS A CLASS B CLASS C INDEX UNIVERSE
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 11.21% 12.13% 16.19% 1.23% 4.18%
Past 5 years......... 15.06% 15.35% n/a 12.00% 12.44%
Since inception:
Class A*............. 20.88% n/a n/a 12.39% 17.19%
Class B**............ n/a 14.85% n/a 9.77% 14.78%
Class C***........... n/a n/a 5.69% 4.24% 8.53%****
</TABLE>
#Performance figures reflect any applicable sales charges.
*The inception date for the Fund's Class A shares was March 3, 1993
(performance is calculated based on the date the Fund first became
available for sale to the public, April 30, 1993.)
**The inception date for the Fund's Class B shares was October 22, 1993.
Russell 2000 Growth Index performance is calculated from October 31,
1993. Morningstar performance is calculated from November 1, 1993.
***The inception date for the Fund's Class C shares was April 30, 1996.
****Since May 1, 1996.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- ------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................. 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)................. none 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends... none none none
Redemption fee*........ none none none
Exchange fee........... none none none
*If you choose to receive your redemption proceeds via Federal Funds wire, a $10
wire fee will be charged to your account.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------------
CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Management fees........ 0.85% 0.85% 0.85%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00%
Other expenses......... 0.60% 0.60% 0.55%
Total annual Fund
operating expenses..... 1.70% 2.45% 2.40%
</TABLE>
- -----------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 738 $ 748 $ 248 $ 343 $ 243
3rd 1,080 1,064 764 748 748
5th 1,445 1,506 1,306 1,280 1,280
10th 2,468 2,601 2,601 2,736 2,736
</TABLE>
9
<PAGE> 138
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY GROWTH FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in mid- and large-cap U.S.
stocks, and seeks to provide additional diversification by investing a
portion of its assets in small-cap U.S. stocks and large-cap international
stocks.
The Fund is managed using a combination of investment styles. The core
portion of the Fund's portfolio is comprised of companies that have had a
proven and consistent record of earnings, but whose prices appear to be low
relative to their underlying profitability. Investments for the international
portion of the Fund are selected using a disciplined value approach that
focuses on long-term earnings projections, asset values and cash flow
generation.
IVY GROWTH WITH INCOME FUND: The Fund seeks to achieve its principal
objective of long-term capital growth by investing in the common stock of
domestic corporations. Companies targeted for investment typically have stock
prices that appear low relative to their expected profitability, rising
earnings, a minimum three-year operating history and capitalizations over
$100 million.
Dividend-paying ability, financial strength and trading liquidity are also
taken into account.
IVY US BLUE CHIP FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the common stock of U.S.
companies occupying leading market positions that are expected to be
maintained or enhanced over time (commonly known as "Blue Chip" companies).
Blue Chip companies tend to have a lengthy history of profit growth and
dividend payment, and a reputation for quality management structure, products
and services. Securities of Blue Chip companies are generally considered to
be highly liquid, since they are well supplied in the marketplace relative to
their smaller-capitalized counterparts and because their trading volume tends
to be higher. The median market capitalization of companies targeted for
investment is expected to be at least $5 billion.
IVY US EMERGING GROWTH FUND: The Fund seeks to achieve its principal
objective of long term capital growth by investing primarily in the equity
securities of domestic corporations that are small and medium sized.
Companies targeted for investment typically are in the early stages of their
life cycles and are believed by the Fund's manager to have the potential to
increase their sales and earnings at above-average rates. These companies
typically are selected from within the technology, health care,
entertainment, and business and consumer services sectors, which have
presented attractive growth opportunities in recent years. Portfolio holdings
are reviewed regularly for valuation, relative strength and changes in
earnings estimates.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income
they generate will vary daily and generally reflect market conditions,
interest rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund
depending upon the timing of your initial purchase and any subsequent
redemption.
OTHER RISKS: The following table identifies the investment techniques that
each Fund's adviser considers important in achieving the Fund's investment
objective or in managing its exposure to risk (and that could therefore have
a significant effect on a Fund's returns). Following the table is a
description of the general risk characteristics of these investment
techniques. Other investment methods that the Funds may use (such as
derivative investments), but that are not likely to play a key role in their
overall investment strategies, are described in the Funds' Statement of
Additional Information (see back cover page for information on how you can
receive a free copy).
<TABLE>
<CAPTION>
- -------------------------------------------------------
INVESTMENT TECHNIQUE: IGF IGWIF IUSBCF IUSEGF
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks.......... X X X X
Foreign securities..... X
Borrowing.............. X X X X
Temporary defensive
positions.............. X X X X
</TABLE>
10
<PAGE> 139
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RISK CHARACTERISTICS:
- - COMMON STOCKS: Common stocks represent a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - FOREIGN SECURITIES: Ivy Growth Fund may invest a significant portion of its
assets in foreign securities. Investing in foreign securities involves a
number of economic, financial and political considerations that are not
associated with the U.S. markets and that could affect the Fund's performance
favorably or unfavorably, depending upon prevailing conditions at any given
time. For example, the securities markets of many foreign countries may be
smaller, less liquid and subject to greater price volatility than those in the
U.S. Foreign investing may also involve brokerage costs and tax considerations
that are not usually present in the U.S. markets. Many of the Fund's foreign
securities also are denominated in foreign currencies and the value of the
Fund's investments, as measured in U.S. dollars, may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations.
Other factors that can affect the value of the Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that
many foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards.
It may also be difficult to obtain reliable information about the securities
and business operations of certain foreign issuers. Settlement of portfolio
transactions may also be delayed due to local restrictions or communication
problems, which can cause a Fund to miss attractive investment opportunities
or impair its ability to dispose of securities in a timely fashion (resulting
in a loss if the value of the securities subsequently declines). The risks of
investing in foreign securities are heightened in countries with new or
developing economies.
- - BORROWING: For temporary purposes, each Fund may borrow up to 10% of the value
of its total assets from qualified banks. Borrowing may exaggerate the effect
on the Fund's share value of any increase or decrease in the value of the
securities it holds. Money borrowed will also be subject to interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: A Fund may from time to time take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective. Investing in debt securities also involves both interest rate and
credit risk. Generally, the value of debt instruments rises and falls
inversely with fluctuations in interest rates. For example, 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. The
market value of debt securities also tends to vary according to the relative
financial condition of the issuer. Bonds with longer maturities tend to be
more volatile than bonds with shorter maturities.
- -- OTHER IMPORTANT INFORMATION
YEAR 2000 RISKS: 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 inability
of computer-based systems to make this distinction could have a seriously
adverse effect on the handling of securities trades, pricing and account
services worldwide. The Funds' 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. Information about the year
2000 readiness of the issuers of the securities that the Funds may purchase
is also taken into consideration during the investment decision-making
process (though such information may not be readily available, particularly
in non-U.S. countries, and may be limited to public filings or statements
from company representatives that are not independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or
indirectly may cause a Fund to lose money).
11
<PAGE> 140
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the
Funds. IMI is an SEC-registered investment advisor with over $5 billion in
assets under management, and provides similar services to the other fifteen
series of Ivy Fund. For its services, IMI receives from Ivy US Blue Chip Fund
an annual fee equal to 0.75% of the Fund's average net assets. For the fiscal
year ending December 31, 1998, the other three Funds paid IMI a fee that was
equal to the following percentages of the Funds' respective average net
assets:
- Ivy Growth Fund, 0.85%;
- Ivy Growth with Income Fund, 0.75%; and
- Ivy US Emerging Growth Fund, 0.85%
- -- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into three different
segments, which are managed by the following individuals:
- James W. Broadfoot, President of IMI and a Vice President of Ivy Fund,
manages the U.S. Emerging Growth segment of the Fund's portfolio. Before
joining IMI in 1990, Mr. Broadfoot was the principal in an investment
counsel firm specializing in emerging growth companies. He has over 25
years of professional investment experience, holds an MBA from the Wharton
School of Business and is a Chartered Financial Analyst.
- Barbara Trebbi, a Senior Vice President of IMI, manages the International
segment of the Fund's portfolio. She is also Managing Director of
International Equities. Ms. Trebbi joined IMI in 1988 and has 11 years of
professional investment experience. She is a Chartered Financial Analyst
and holds a graduate diploma from the London School of Economics.
- Paul P. Baran, a Senior Vice President of IMI, manages the core growth
segment of the Fund's portfolio. Before joining IMI, Mr. Baran was Senior
Vice President/Chief Investment Officer of Central Fidelity National Bank.
He has 24 years of professional investment experience and is a Chartered
Financial Analyst. He has an MBA from Wayne State University.
IVY GROWTH WITH INCOME FUND: The Fund is managed by Paul P. Baran (see "Ivy
Growth Fund," above).
IVY US BLUE CHIP FUND: The Fund is managed by Paul P. Baran (see "Ivy Growth
Fund," above).
IVY US EMERGING GROWTH FUND: The Fund is managed by James W. Broadfoot (see "Ivy
Growth Fund," above).
12
<PAGE> 141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of
regular trading (usually 4:00 p.m. Eastern time) on the New York Stock
Exchange on each day the Exchange is open for trading (normally any weekday
that is not a national holiday).
Each portfolio security that is listed or traded on a recognized stock
exchange is valued at the security's last sale price on the exchange on which
it was purchased.
If no sale is reported at that time, the average between the last bid and
asked prices is used. Securities and other Fund assets for which market
prices are not readily available are priced at their "fair value" as
determined by IMI in accordance with procedures approved by the Funds' Board
of Trustees. IMI may also price a foreign security at its fair value if
events materially affecting the estimated value of the security occur between
the close of the foreign exchange on which the security is principally traded
and the time as of which a Fund prices its shares. Fair-value pricing under
these circumstances is designed to protect existing shareholders from the
actions of short-term investors trading into and out of a Fund at a time in
an attempt to profit from short term market movements. When such fair-value
pricing occurs, however, there may be some period of time during which a
Fund's share price and/or performance information is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based
on a Fund's net asset value ("NAV") next determined after your instructions
are received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the
Fund's transfer agent) or by your registered securities dealer. Each purchase
and redemption order is subject to any applicable sales charge (see "Choosing
the appropriate class of shares""). Since Ivy Growth Fund may invest in
securities that are listed on foreign exchanges that may trade on weekends or
other days when the Funds do not price their shares, that Fund's share value
may change on days when shareholders will not be able to purchase or redeem
the Fund's shares.
- -- HOW TO BUY SHARES
Please read these sections below carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
The essential features of the Funds' different classes of shares are
described below. If you do not specify on your Account Application which
class of shares you are purchasing, it will be assumed that you are
purchasing Class A shares. Each Fund has adopted separate distribution plans
pursuant to Rule 12b-1 under the 1940 Act for their Class A, B and C shares
that allow the Fund to pay distribution and other fees for the sale and
distribution of its shares and for services provided to shareholders.
Because these fees are paid out of the Fund's assets on an ongoing basis,
over time they will increase the cost of your investment and may cost you
more than paying other types of sales charges.
- CLASS A SHARES: Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% (the "offering price"). The sales charge may be
reduced or eliminated if certain conditions are met (see "Additional
purchase information"). Class A shares are subject to a 0.25% Rule 12b-1
service fee.
- CLASS B SHARES: Class B shares are offered at net asset value, without an
initial sales charge, but subject to a contingent deferred sales charge
("CDSC") that declines from 5.00% to zero on certain redemptions within six
years of purchase. Class B shares are subject to a 0.75% Rule 12b-1
distribution fee and a 0.25% Rule 12b-1 service fee, and convert
automatically into Class A shares eight years after purchase.
- CLASS C SHARES: Class C shares are offered at net asset value, without an
initial sales charge, but subject to a CDSC of 1.00% for redemptions within
the first year of purchase. Class C
13
<PAGE> 142
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
shares are subject to a 0.75% Rule 12b-1 distribution fee and a 0.25% Rule
12b-1 service fee.
- CLASS I SHARES: Class I shares are offered to certain classes of investors
of Ivy US Blue Chip Fund at net asset value, without any sales load or Rule
12b-1 fees.
The following table displays the various investment minimums, sales charges
and expenses that apply to each class.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000 $5,000,000
Minimum subsequent
investment*.......... $100 $100 $100 $10,000
Initial sales
charge............... Maximum None None None
5.75%, with
options for a
reduction or
waiver
CDSC................. None, except Maximum 1.00% for the None
on certain 5.00%, first year
NAV purchases declines over
six years
Service and
distribution fees.... 0.25% service 0.75% 0.75% None
fee distribution distribution
fee and 0.25% fee and 0.25%
service fee service fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- ADDITIONAL PURCHASE INFORMATION
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth
below (which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED 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 of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- - "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher) of all Ivy Fund Class A shares you
own.
- - A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the following
methods:
- - through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- - under certain qualified retirement plans;
- - as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- - as an employee of a selected dealer; or
- - through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Funds 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 SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc. ("IMDI"),
the Fund's distributor, may pay the dealer or agent (out of IMDI's own
resources) for
14
<PAGE> 143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASE AMOUNT COMMISSION
- --------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those 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 time period.
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by the
Distributor. This privilege will apply only to Class A shares of a Fund that are
purchased using proceeds obtained by such clients through redemption of another
mutual fund's shares on which a sales charge was paid. Purchases must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
after purchase.
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 you redeem your Class C
shares within one year of purchase they 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 following rates:
<TABLE>
<CAPTION>
- --------------------------------------------------------
CDSC AS A PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- --------------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares 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. No charge will be assessed on increases in account value
above the original purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - Shares held more than six years;
- - Shares acquired through reinvestment of dividends and distributions;
- - Shares subject to the lowest CDSC percentage, on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation which is
not subject to a CDSC, redeemed first; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
- - Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- - Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- - Redemptions resulting from a tax-free return of excess contribution to an IRA.
- - Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- - Withdrawals through the Systematic Withdrawal Plan of up to 12.00% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for federal income
tax purposes. Class C shares do not have a similar conversion privilege.
CLASS I SHARES: Class I shares are offered only to institutions and certain
individuals, and are not
15
<PAGE> 144
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
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.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at
the end of this Prospectus. Enclose a check payable to the Fund in which you
wish to invest. You should note on the check the class of shares you wish to
purchase. (see page 14 for minimum initial investments.) Deliver your
application materials to your registered representative or selling broker, or
send them to one of the addresses below:
- BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- By COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds
electronically drawn each month from your bank account and invested as a
purchase of shares into your Ivy Fund account. Complete sections 6A and 7B
of the Account Application.
-- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through
your registered securities dealer or directly through IMSC. If you choose
to redeem through your registered securities dealer, the dealer is
responsible for properly transmitting redemption orders in a timely manner.
If you choose to redeem directly through IMSC, you have several ways to
submit your request:
- BY MAIL: Send your written redemption request to IMSC at one of the
addresses at left. Be sure that all registered owners listed on the account
sign the request. Medallion signature guarantees and supporting legal
documentation may be required. When you redeem, IMSC will normally send
redemption proceeds to you on the next business day, but may take up to
seven days (or longer in the case of shares recently purchased by check).
- BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual,
joint or custodial account. To process your redemption order by telephone,
you must have telephone redemption privileges on your account. IMSC 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 or
IMSC may be liable for any losses due to unauthorized or fraudulent
telephone instructions. Requests by telephone can only be accepted for
amounts up to $50,000.
- BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
16
<PAGE> 145
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- BY CHECK: Unless otherwise instructed in writing, checks will be made
payable to the current account registration and sent to the address of
record.
- BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge
you a fee for receiving a Federal Funds wire.
- BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within six years of purchase, and to Class C shares that are
redeemed within one year of purchase.
- 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, unless you instruct
otherwise.
- Any shares subject to a CDSC will be redeemed last unless you elect
otherwise.
- Shares will be redeemed in the order described under "Additional Purchase
Information -- Class B and Class C Shares".
- A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for
more than 12 months.
- A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy Fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- BY MAIL: Send your written exchange request to IMSC at one of the addresses
on page 16 of this Prospectus. Be sure that all registered owners listed on
the account sign the request.
- BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange
transaction. To process your exchange order by telephone, you must have
telephone exchange privileges on your account. IMSC 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 or IMSC may be
liable for any losses due to unauthorized or fraudulent telephone
instructions.
IMPORTANT EXCHANGE INFORMATION:
- You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- It is the policy of the Funds to discourage the use of the exchange
privilege for the purpose of timing short-term market fluctuations. The
Funds may therefore limit the frequency of exchanges by a shareholder,
charge a redemption fee (in the case of certain funds), or cancel a
shareholder's exchange privilege if at any time it appears that such
market-timing strategies are being used. For example, shareholders
exchanging more than five times in a 12-month period may be considered to
be using market-timing strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- The Funds generally declare and pay dividends and capital gain
distributions (if any) at least once a year.
- Dividends and distributions are "reinvested" in additional Fund shares
unless you request to receive them in cash.
- Reinvested dividends and distributions are added to your account at NAV and
are not subject to a
17
<PAGE> 146
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
sales charge regardless of which share class you own.
- Cash dividends and distributions can be sent to you:
- BY MAIL: A check will mailed to the address of record unless otherwise
instructed.
- BY ELECTRONIC FUNDS TRANSFER: Your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at
800.777.6472.
Dividends ordinarily will vary from one class to another. Each Fund intends
to declare and pay dividends annually. The Funds will distribute net
investment income and net realized capital gains, if any, at least once a
year. The Funds 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 Internal
Revenue Code of 1986, as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you
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 you as long term capital gains,
regardless of how long you have held your shares. Dividends are taxable to
you in the same manner whether received in cash or reinvested in additional
Fund shares.
If shares of the Fund are held in a tax-deferred account, such as a
retirement plan, income and gain will not be taxable each year. Instead, the
taxable portion of amounts held in a tax-deferred account generally will be
subject to tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the 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. In certain years, you may be able to claim a credit
or deduction on your income tax return for your share of foreign taxes paid
by the Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain
or loss which will be long term or short term, generally depending upon how
long you held your shares.
The Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all distributions payable to you if you fail to provide the Fund with
your correct taxpayer identification number or to make required
certifications, or if you have been notified by the Internal Revenue Service
("IRS") that you are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against your U.S.
Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser 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.
18
<PAGE> 147
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
19
<PAGE> 148
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Funds' financial performance for the past five years (or less if a Fund has
a shorter operating history), and reflects results for a single Fund share.
The total returns in the table represent the rate an investor would have
earned (or lost) each year on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Funds'
financial statements, is included in its Annual Report to shareholders
(which is available upon request).
<TABLE>
<CAPTION>
=================================================================================================================================
CLASS A
IVY GROWTH FUND ------------------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 17.80 $ 17.76 $ 16.75 $ 13.91 $ 15.14
------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income............................... .01 .02 .02(a) .05(a) .05(a)
Net gains or losses on securities (both realized and
unrealized)....................................... 2.49 1.98 2.86 3.73 (.49)
------------------------------------------------------------------------
Total from investment operations.................... 2.50 2.00 2.88 3.78 (.44)
------------------------------------------------------------------------
Less distributions
Dividends
From net investment income........................ .02 .02 .02 .02 .05
In excess of net investment income................ -- .13 .11 -- --
Distributions
From capital gains................................ .40 1.81 1.74 .89 .74
In excess of capital gains........................ -- -- -- .03 --
------------------------------------------------------------------------
Total distributions............................... .42 1.96 1.87 .94 .79
------------------------------------------------------------------------
Net asset value, end of period........................ $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
========================================================================
Total return (%)...................................... 14.05(b) 11.69(b) 17.22(b) 27.33(b) (2.97)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $318,444 $320,000 $314,908 $289,954 $231,446
Ratio of expenses to average net assets
With expense reimbursement (%)...................... -- -- 1.45 1.59 1.38
Without expense reimbursement (%)................... 1.38 1.38 1.45 1.60 1.49
Ratio of net investment income to average net assets
(%)................................................. .03 .13 .13(a) .32(a) .32(a)
Portfolio turnover rate (%)........................... 59 39 72 41 39
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================================
CLASS A
IVY GROWTH WITH INCOME FUND ------------------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 12.59 $ 11.38 $ 10.98 $ 9.08 9.70
----------------------------------------------------------------------
Income (loss) from investment operations
Net investment income............................... .04 .08 .08 .11 .17
Net gains or losses on securities (both realized and
unrealized)....................................... 1.19 2.37 2.16 2.13 (.36)
----------------------------------------------------------------------
Total from investment operations.................... 1.23 2.45 2.24 2.24 (.19)
----------------------------------------------------------------------
Less distributions
Dividends
From net investment income........................ -- .03 .08 .08 .17
In excess of net investment income................ -- -- .03 -- .01
Distributions from capital gains.................... .28 1.21 1.73 .26 .25
----------------------------------------------------------------------
Total distributions............................... .28 1.24 1.84 .34 .43
----------------------------------------------------------------------
Net asset value, end of period........................ $ 13.54 $ 12.59 $ 11.38 $ 10.98 $ 9.08
======================================================================
Total return (%)...................................... 9.64(b) 21.57(b) 20.46(b) 24.93(b) (2.03)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $69,733 $ 69,742 $ 63,219 $ 59,054 $ 26,017
Ratio of expenses to average net assets (%)........... 1.60 1.59 1.81 1.96 1.84
Ratio of net investment income to average net assets
(%)................................................. .28 .58 .68 1.06 1.83
Portfolio turnover rate (%)........................... 108 36 138 81 36
</TABLE>
20
<PAGE> 149
<TABLE>
<CAPTION>
=========================================================================================================
CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
for the period (a) Net investment
April 30, 1996 income (loss) is net of
for the year ended for the year ended (Commencement) expenses reimbursed
December 31, December 31, to December 31, by manager.
- ---------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996 (b) Total return does
- --------------------------------------------------------------------------------------------------------- not reflect a sales
<S> <C> <C> <C> <C> <C> <C> <C> charge.
$ 17.72 $ 17.69 $ 16.75 $ 13.91 $ 15.14 $ 17.47 $ 17.59 $ 18.46
- --------------------------------------------------------------------------------------------------------- (c) Total return
total return and
2.46 1.96 2.81 3.71 (.54) 2.38 1.86 1.02 does not reflect
- --------------------------------------------------------------------------------------------------------- a sales charge.
2.30 1.82 2.68 3.63 (.58) 2.22 1.79 .96
- --------------------------------------------------------------------------------------------------------- (d) Annualized
.02 -- -- -- -- .02 -- --
-- .07 -- -- -- -- .13 .09
.40 1.72 1.74 .73 .52 .40 1.78 1.74
-- -- -- .06 .13 -- -- --
- ---------------------------------------------------------------------------------------------------------
.42 1.79 1.74 .79 .65 .42 1.91 1.83
- ---------------------------------------------------------------------------------------------------------
$ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91 $ 19.27 $ 17.47 $ 17.59
=========================================================================================================
12.99(b) 10.69(b) 16.02(b) 26.13(b) (3.90)(b) 12.72(b) 10.58(b) 5.20(c)
$ 4,889 $ 4,433 $ 3,850 $ 2,669 $ 1,399 $ 263 $ 400 $ 90
-- -- 2.37 2.55 2.34 -- -- 2.44(d)
2.32 2.30 2.37 2.56 2.45 2.53 2.33 2.44(d)
(.90) (.79) (.79)(a) (.64)(a) (.64)(a) (1.11) (.82) (.86)(a)(d)
59 39 72 41 39 59 39 72
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================
CLASS B CLASS C
- -------------------------------------------------------------------------------------------------
for the period
April 30, 1996
for the year ended for the year ended (Commencement)
December 31, December 31, to December 31,
- -------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12.54 $ 11.36 $ 10.98 $ 9.08 $ 9.70 $ 12.44 $ 11.37 $ 11.73
- ------------------------------------------------------------------------------------------------
(.06) (.02) (.01) .03 .09 (.05) (.01) (.08)
1.18 2.37 2.15 2.13 (.36) 1.18 2.35 1.53
- -------------------------------------------------------------------------------------------------
1.12 2.35 2.14 2.16 (.27) 1.13 2.34 1.45
- -------------------------------------------------------------------------------------------------
-- .03 -- .01 .09 -- -- --
-- -- .08 -- .01 -- -- .08
.28 1.14 1.68 .25 .25 .28 1.27 1.73
- -------------------------------------------------------------------------------------------------
.28 1.17 1.76 .26 .35 .28 1.27 1.81
- -------------------------------------------------------------------------------------------------
$ 13.38 $ 12.54 $ 11.36 $ 10.98 $ 9.08 $ 13.29 $ 12.44 $ 11.37
=================================================================================================
9.01(b) 20.74(b) 19.59(b) 23.94() (2.88)(b) 9.16(b) 20.70(b) 12.37(c)
$23,975 $20,071 $13,473 $ 8,868 $ 5,849 $ 643 $ 4,356 $ 28
2.33 2.31 2.55 2.75 2.70 2.27 2.23 3.02(d)
(.45) (.13) (.06) .27 .97 (.39) (.05) (.53)(d)
108 36 138 81 36 108 36 136
================================================================================================
</TABLE>
21
<PAGE> 150
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
==========================================================================================================
IVY US BLUE CHIP FUND CLASS A CLASS B CLASS C
-------------------------------------------
For the period For the period
November 2, 1998 November 6, 1998
(Commencement) (Commencement)
to December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1998 1998 1998
-------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.30 $10.30
-------------------------------------------
Income (loss) from investment operations
Net investment loss (a)(b)................................ -- (.01) (.01)
Net gains or losses on securities (both realized and
unrealized)(a).......................................... .74 .43 .43
-------------------------------------------
Total from investment operations.......................... .74 .42 .42
-------------------------------------------
Net asset value, end of period.............................. $10.74 $10.72 $10.72
===========================================
Total return (%)(c)......................................... 7.40 4.08 4.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 726 $1,047 $ 110
Ratio of expenses to average net assets (%)
With expense reimbursement (%)(d)......................... 1.43 2.13 2.22
Without expense reimbursement (%)(d)...................... 6.34 7.04 7.13
Ratio of net investment income (loss) to average net assets
(%)(a)(b)(d).............................................. .02 (.68) (.77)
Portfolio turnover rate (%)................................. 3 3 3
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================================================
IVY US EMERGING GROWTH FUND CLASS A
---------------------------------------------------------------
for the year ended December 31,
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1998 1997 1996 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 27.67 $ 26.54 $ 24.12 $ 18.38 $ 17.93
----------------------------------------------------------------
Income (loss) from investment operations
Net investment loss.................................. (.44)(a) (.41)(a) (.35) (.24) (.24)(b)
Net gains or losses on securities (both realized and
unrealized)........................................ 5.42(a) 1.54(a) 4.84 7.90 .82
----------------------------------------------------------------
Total from investment operations..................... 4.98 1.13 4.49 7.66 .58
----------------------------------------------------------------
Less distributions
Distributions from capital gains..................... -- -- 2.07 1.92 --
Returns of capital................................... -- -- -- -- .13
----------------------------------------------------------------
Total distributions.................................. -- -- 2.07 1.92 .13
----------------------------------------------------------------
Net asset value, end of period......................... $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
================================================================
Total return (%)....................................... 18.00(c) 4.26(c) 18.52(c) 42.07(c) 3.29(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............... $62,961 $64,910 $55,944 $39,456 $21,493
Ratio of expenses to average net assets
With expense reimbursement (%)....................... -- -- -- -- 2.20
Without expense reimbursement (%).................... 1.70 1.67 1.76 1.95 2.22
Ratio of net investment loss to average net assets
(%).................................................. (1.48) (1.37) (1.31) (1.39) (1.72)(b)
Portfolio turnover rate (%)............................ 67 65 68 86 67
==========================================================================================================================
</TABLE>
22
<PAGE> 151
<TABLE>
<CAPTION>
===================================================================================================
CLASS B CLASS C (a) Based on
- --------------------------------------------------------------------------------------------------- average shares
for the period outstanding.
April 30, 1996
for the year ended for the year ended (Commencement) (b) Net investment
December 31, December 31, to December 31, income (loss) is net of
- --------------------------------------------------------------------------------------------------- expenses reimbursed
1998 1997 1996 1995 1994 1998 1997 1996 by manager.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> (c) Total return does
$ 27.26 $ 26.33 $ 24.12 $ 18.38 $ 17.93 $ 27.23 $ 26.29 $ 29.69 not reflect a sales
- --------------------------------------------------------------------------------------------------- charge.
(.65)(a) (.33)(a) (.40) (.35) (.29)(b) (.63)(a) (.34)(a) (.14)
5.32(a) 1.26(a) 4.68 7.85 .74 5.31(a) 1.28(a) (1.19) (d) Annualized
- ---------------------------------------------------------------------------------------------------
4.67 .93 4.28 7.50 .45 4.68 .94 (1.33) (e) Total return
- --------------------------------------------------------------------------------------------------- represents aggregate
-- -- 2.07 1.76 -- -- -- 2.07 total return and
-- -- -- -- -- -- -- -- does not reflect
- --------------------------------------------------------------------------------------------------- a sales charge.
-- -- 2.07 1.76 -- -- -- 2.07
- ---------------------------------------------------------------------------------------------------
$ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38 $ 31.91 $ 27.23 $ 26.29
===================================================================================================
17.13(c) 3.53(c) 17.65(c) 41.03(c) 2.51(c) 17.19(c) 3.58(c) (4.48)(e)
$52,940 $47,789 $35,321 $13,985 $ 5,015 $ 9,664 $ 9,484 $ 4,018
-- -- -- -- 2.95
2.45 2.43 2.52 2.70 2.97 2.40 2.39 2.52(d)
(2.23) (2.13) (2.07) (2.14) (2.47)(b) (2.18) (2.09) (2.07)(d)
67 65 66 86 67 67 65 68
</TABLE>
23
<PAGE> 152
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
24
<PAGE> 153
Account
Application
FUND USE ONLY
________________________
Account Number
________________________
Dealer/Branch/Rep
________________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
_________________________________________________________________________
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
_________________________________________________________________________
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address _________________________________________________________________
City____________________________ State ___________________ Zip __________
Phone # (day) (_____)____________________________________________________
Phone # (evening) (_____)________________________________________________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ___________Minor's state of residence____________________
2 TAX I.D.
Citizenship: ___ U.S. ___Other (please specify):_________________
Social security #___-__-____ or Tax identification #_________________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _________
Representative's name _______________________________________________
Representative's #__________________ Representative's phone___________
Authorized signature of dealer________________________________________
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) for $__________ made payable
to the appropriate fund. Please invest it in:
______Class A _____Class C _______Class B _____Class I shares
("*" Funds only) of the following fund(s):
<TABLE>
<S> <C>
$ _____________Ivy Growth Fund $ _____________Ivy US Blue Chip Fund*
$ _____________Ivy Growth with Income Fund $ _____________Ivy US Emerging Growth Fund
</TABLE>
B. I qualify for a reduction or elimination of the 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 the account(s) listed below.
Fund name:_________________________ Fund name: ______________________
Account #:_________________________ Account #: ______________________
If establishing a Letter of Intent, you will need to purchase Class A
shares over a 13-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
C. FOR DEALER USE ONLY
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: ____________________ __________________ __________________
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 154
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 the same class of a different Ivy fund account.
Fund name:____________________________________________________
Account #:____________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a
different Ivy fund account.
Fund name: ___________________________________________________
Account #:____________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $_____________________ for each time period indicated below
and invest my bank proceeds into the following Ivy fund:
Fund name: __________________________________________________________
Share class: ___ Class A ___Class B ___Class C
Account #: __________________________________________________________
2. Debit my bank account:
____Annually (on the ____day of the month of_______________________).
___ Semiannually (on the ____ day of the months of ___ and ___).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly* ___ once per month on the ___ day
___ twice per month on the ____ days
___ 3 times per month on the ____ days
___ 4 times per month on the ____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($50 minimum) $______for each time period indicated
below from the following Ivy Fund account:
Fund name: ___________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: ___________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of ___________).
___ Semiannually (on the _____ day of the months of _____ and _____).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional shares of the same class of a
different Ivy fund:
Fund name: _____________________________________________
Account #: _____________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual ______________________________________________
Account # (if applicable) _______________________________________________
Street __________________________________________________________________
City _____________________________ State ______________________ Zip _____
B. FED WIRE/EFT INFORMATION
Financial institution ___________________________________________________
ABA #____________________________________________________________________
Account #________________________________________________________________
Street___________________________________________________________________
City ________________________ State ____________________ Zip _________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
__________________________________________ ____________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
DETACH ON PERFORATION TO MAIL
(Remember to sign Section 8)
<PAGE> 155
* Symbol not assigned as of this printing.
- --------------------------------------------------------------------------------
- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- --------------------------------------------------------------------------------
<S> <C> <C>
Ivy Growth Fund - Class A IVYFX 466002102
Ivy Growth Fund - Class B IVYBX 466002201
Ivy Growth Fund - Class C IVYCX 465897627
Ivy Growth with Income Fund - Class A IVYIX 46600K102
Ivy Growth with Income Fund - Class B IGIBX 46600K300
Ivy Growth with Income Fund - Class C IGICX 465897619
Ivy US Blue Chip Fund - Class A * 465898609
Ivy US Blue Chip Fund - Class B * 465898708
Ivy US Blue Chip Fund - Class C * 465898807
Ivy US Blue Chip Fund - Class I * 465898872
Ivy US Emerging Growth Fund - Class A IVEGX 465897106
Ivy US Emerging Growth Fund - Class B IVEBX 465897205
Ivy US Emerging Growth Fund - Class C IVGEX 465897635
</TABLE>
* Symbol not assigned as of this printing.
<PAGE> 156
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statements of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and the Funds' annual and semiannual reports to
shareholders. The Funds' annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Funds' performance during its most recent fiscal year. The SAI and
the Funds' annual and semiannual reports are available upon request and
without charge from the Distributor at the following address and phone
number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and the Funds' annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-800-SEC-0330
for further details). Information about the Funds is also available on
the SEC's Internet Website (www.sec.gov), and copies of this
information may be obtained, upon payment of a copying fee, by writing
the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 157
IVY LOGO
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 U.S. EQUITY FUNDS ADVISOR CLASS SHARES
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
Ivy Fund is a registered open-end investment company consisting
of nineteen separate portfolios. This Prospectus relates to the
Advisor Class shares of the four funds listed above (the
"Funds"). The Funds also offer Class A, Class B, and Class C
shares (and Class I shares, in the case of Ivy US Blue Chip
Fund), which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary
is a criminal offense.
Investments in the Funds are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
-- CONTENTS
2 Ivy Growth Fund
4 Ivy Growth with Income Fund
6 Ivy US Blue Chip Fund
8 Ivy US Emerging Growth Fund
10 Additional information
about investment strategies
and risks
12 Management
13 Shareholder information
17 Financial highlights
21 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
MACKENZIE LOGO
<PAGE> 158
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
(Globe Artwork)
IVY
GROWTH
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a wide spectrum of equity securities, including U.S.
companies of any size and large-cap international stocks.
The Fund's portfolio is divided into three segments, each of which is managed
according to the investment style of its portfolio manager (such as growth,
value or international).
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a company's
success or failure. The market value of common stock can fluctuate significantly
even where "management risk" is not a factor, so you could lose money if you
redeem your Fund shares at a time when the Fund's stock portfolio is not
performing as well as expected.
SMALL AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since smaller companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on January 12, 1960 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares,
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '98: 21.57%
Worst quarter Q3 '98: (17.04%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
- -----------------------------------------------------
S&P 500 WILSHIRE
CLASS A INDEX 5000
- ----------------------------------------------------
<S> <C> <C> <C>
Past year.............. 14.05% 29.78% 21.72%
Past 5 years........... 13.03% 24.49% 19.43%
Past 10 years.......... 13.31% 19.40% n/a
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)....................................... none
Maximum deferred sales charge (load)(as a
percentage of purchase price)................ none
Maximum sales charge (load) imposed on
reinvested dividends......................... none
Redemption fee*.............................. none
Exchange fee................................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
<S> <C>
Management fees*........................... 0.85%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 0.33%
Total annual Fund
operating expenses......................... 1.18%
</TABLE>
*Management fees are reduced to 0.75% for net assets over $350
million.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------------------
YEAR
- -----------------------------
<S> <C>
1st $ 120
3rd 375
5th 649
10th 1,432
</TABLE>
3
<PAGE> 160
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
(Globe)
IVY GROWTH
WITH INCOME
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests almost exclusively in U.S. equity securities, a
number of which pay dividends.
Among the chief characteristics that the Fund's manager seeks in selecting
securities are:
- - stock prices that appear low relative to the company's expected profitability;
- - financial security with capitalizations over $100 million; and
- - more than three years of operating history.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a company's
success or failure. The market value of common stock can fluctuate significantly
even where "management risk" is not a factor, so you could lose money if you
redeem your Fund shares at a time when the Fund's stock portfolio is not
performing as well as expected.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking relatively consistent
performance without the volatility of more aggressive growth funds.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and how the Fund's average annual returns since its inception on
April 1, 1984 compare with those of a broad measure of market performance. The
Fund's past performance is not an indication of how the Fund will perform in the
future.
Since Advisor Class shares have been outstanding for less than one year, the
information presented below relates to the Fund's Class A shares, exclusive of
any applicable sales charges. The performance for Advisor Class shares would
have been substantially similar to that of Class A shares, because all Fund
shares are invested in the same portfolio of securities. Any differences in the
returns for the Fund's Class A and Advisor Class shares would result from
variations in their respective expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
- --------------------------------------------------------
</TABLE>
[CHART]
*Grantham, Mayo Van Otterloo & Co. was subadviser to the Fund from April 1, 1984
through June 30, 1989.
Best quarter Q4 '98: 17.92%
Worst quarter Q3 '98: (15.69%)
4
<PAGE> 161
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
-----------------------------------------------------------
MORNINGSTAR
WILSHIRE MID-CAP BLEND
CLASS A S&P 500 INDEX 5000 UNIVERSE
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ 9.84% 29.78% 21.72% 9.31%
Past 5 years......... 14.51% 24.49% 19.43% 15.45%
Past 10 years........ 14.09% 19.40% n/a 14.75%
</TABLE>
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)................ none
Maximum deferred sales charge (load) (as a
percentage of purchase price)...................... none
Maximum sales charge (load) imposed on reinvested
dividends.......................................... none
Redemption fee*.................................... none
Exchange fee....................................... none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds wire,
a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
Management fees............................ 0.75%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 0.45%
Total annual Fund
operating expenses......................... 1.20%
</TABLE>
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------------------
YEAR
- -----------------------------
<S> <C>
1st $ 122
3rd 381
5th 660
10th 1,455
</TABLE>
5
<PAGE> 162
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Globe)
IVY
US BLUE CHIP
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the common stocks of U.S. companies occupying
major market positions that are expected to be maintained or enhanced over time
(commonly known as "Blue Chip" companies).
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion. The Fund's manager uses an equity style that
focuses on both growth and value.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE INFORMATION
The Fund has been operating for less than a year, therefore no performance
information is available.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)................ none
Maximum deferred sales charge (load) (as a
percentage of purchase price)...................... none
Maximum sales charge (load) imposed on reinvested
dividends.......................................... none
Redemption fee*.................................... none
Exchange fee....................................... none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds wire,
a $10 wire fee will be charged to your account.
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------
Management fees............................ 0.75%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 5.24%
Total annual Fund
operating expenses......................... 5.99%
Expenses reimbursed*....................... 4.91%
Net Fund operating expenses*............... 1.08%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.15% of the Fund's
average net assets (excluding Rule 12b-1 fees and taxes). For each
of the following nine years, the Investment Manager will ensure
that these expenses do not exceed 2.50% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ---------------------------
YEAR
- ---------------------------
<S> <C>
1st $110
3rd 576
</TABLE>
7
<PAGE> 164
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
(Globe)
IVY US EMERGING
GROWTH FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities of small-
and medium-sized U.S. companies that are in the early stages of their life
cycles and that the Fund's manager believes have the potential to increase their
sales and earnings at above-average rates.
Companies targeted for investment typically are in the early stages of their
life cycles and are believed by the Fund's manager to have the potential to
increase their sales and earnings at above-average rates.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stock represents a proportionate ownership interest in a
company. The market value of common stock can fluctuate significantly even where
"management risk" is not a factor, so you could lose money if you redeem your
Fund shares at a time when the Fund's stock portfolio is not performing as well
as expected.
SMALL AND MEDIUM SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since small companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
8
<PAGE> 165
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since it was first offered for sale to the public on April 30, 1993 compare
with those of a broad measure of market performance. The Fund's past
performance is not an indication of how the Fund will perform in the
future.
Since Advisor Class shares have been outstanding for less than one year,
the information presented below relates to the Fund's Class A shares,
exclusive of any applicable sales charges. The performance for Advisor
Class shares would have been substantially similar to that of Class A
shares, because all Fund shares are invested in the same portfolio of
securities. Any differences in the returns for the Fund's Class A and
Advisor Class shares would result from variations in their respective
expense structures.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years
FOR CLASS A SHARES ending December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '98: 31.07%
Worst quarter Q3 '98: (17.82%)
<TABLE>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
- -----------------------------------------------------
MORNINGSTAR
RUSSELL 2000 SMALL GROWTH
CLASS A GROWTH INDEX UNIVERSE
- -----------------------------------------------------------
<S> <C> <C> <C>
Past year............ 18.00% 1.23% 4.18%
Past 5 years......... 16.43% 12.00% 12.44%
Since inception*..... 22.13% 12.39% 17.19%
</TABLE>
*The inception date for the Fund's Class A shares was March 3, 1993
(performance is calculated based on the date the Fund first became
available for sale to the public, April 30, 1993).
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)....................................... none
Maximum deferred sales charge (load)(as a
percentage of purchase price)................ none
Maximum sales charge (load) imposed on
reinvested dividends......................... none
Redemption fee*.............................. none
Exchange fee................................. none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
<S> <C>
Management fees............................ 0.85%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 0.37%
Total annual Fund
operating expenses......................... 1.22%
</TABLE>
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------------------
YEAR
- -----------------------------
<S> <C>
1st $ 124
3rd 387
5th 670
10th 1,477
</TABLE>
9
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US EQUITY FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY GROWTH FUND: The Fund seeks to achieve its principal objective of long-term
capital growth by investing primarily in mid- and large-cap U.S. stocks, and
seeks to provide additional diversification by investing a portion of its assets
in small-cap U.S. stocks and large-cap international stocks.
The Fund is managed using a combination of investment styles. The core portion
of the Fund's portfolio is comprised of companies that have had a proven and
consistent record of earnings, but whose prices appear to be low relative to
their underlying profitability. Investments for the international portion of the
Fund are selected using a disciplined value approach that focuses on long-term
earnings projections, asset values and cash flow generation.
IVY GROWTH WITH INCOME FUND: The Fund seeks to achieve its principal objective
of long-term capital growth by investing in the common stock of domestic
corporations. Companies targeted for investment typically have stock prices that
appear low relative to the their expected profitability, rising earnings, a
minimum three-year operating history and capitalizations over $100 million.
Dividend-paying ability, financial strength and trading liquidity are also taken
into account.
IVY US BLUE CHIP FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the common stock of U.S.
companies occupying leading market positions that are expected to be maintained
or enhanced over time (commonly known as "Blue Chip" companies). Blue Chip
companies tend to have a lengthy history of profit growth and dividend payment,
and a reputation for quality management structure, products and services.
Securities of Blue Chip companies are generally considered to be highly liquid,
since they are well supplied in the marketplace relative to their
smaller-capitalized counterparts and because their trading volume tends to be
higher. The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
IVY US EMERGING GROWTH FUND: The Fund seeks to achieve its principal objective
of long term capital growth by investing primarily in the equity securities of
domestic corporations that are small and medium sized. Companies targeted for
investment typically are in the early stages of their life cycles and are
believed by the Fund's manager to have the potential to increase their sales and
earnings at above-average rates. These companies typically are selected from
within the technology, health care, entertainment, and business and consumer
services sectors, which have presented attractive growth opportunities in recent
years. Portfolio holdings are reviewed regularly for valuation, relative
strength and changes in earnings estimates.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: The following table identifies the investment techniques that each
Fund's manager considers important in achieving the Fund's investment objective
or in managing its exposure to risk (and that could therefore have a significant
effect on a Fund's returns). Following the table is a description of the general
risk characteristics of these investment techniques. Other investment methods
that the Funds may use (such as derivative investments), but that are not likely
to play a key role in their overall investment strategies, are
10
<PAGE> 167
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
described in the Funds' Statement of Additional Information (see back cover page
for information on how you can receive a free copy).
<TABLE>
<CAPTION>
- ----------------------------------------------------
INVESTMENT TECHNIQUE: IGF IGWIF IUSBCF IUSEGF
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks.......... X X X X
Foreign securities..... X
Borrowing.............. X X X X
Temporary defensive
positions.............. X X X X
</TABLE>
RISK CHARACTERISTICS:
- - COMMON STOCKS: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - FOREIGN SECURITIES: Ivy Growth Fund may invest a significant portion of its
assets in foreign securities. Investing in foreign securities involves a
number of economic, financial and political considerations that are not
associated with the U.S. markets and that could affect the Fund's performance
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets. Many of the Fund's foreign securities
also are denominated in foreign currencies and the value of the Fund's
investments, as measured in U.S. dollars, may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. Currency conversions can also be costly.
Other factors that can affect the value of the Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that
many foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards.
It may also be difficult to obtain reliable information about the securities
and business operations of certain foreign issuers. Settlement of portfolio
transactions may also be delayed due to local restrictions or communication
problems, which can cause a Fund to miss attractive investment opportunities
or impair its ability to dispose of securities in a timely fashion (resulting
in a loss if the value of the securities subsequently declines). The risks of
investing in foreign securities are heightened in countries with new or
developing economies.
- - BORROWING: For temporary purposes, each Fund may borrow up to 10% of the value
of its total assets from qualified banks. Borrowing may exaggerate the effect
on the Fund's share value of any increase or decrease in the value of the
securities it holds. Money borrowed will also be subject to interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: A Fund may from time to time take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective. Investing in debt securities also involves both interest rate and
credit risk. Generally, the value of debt instruments rises and falls
inversely with fluctuations in interest rates. For example, 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. The
market value of debt securities also tends to vary according to the relative
financial condition of the issuer. Bonds with longer maturities tend to be
more volatile than bonds with shorter maturities.
- -- OTHER IMPORTANT INFORMATION
YEAR 2000 RISKS: 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 inability of
computer-based systems to make this distinction could have a seriously adverse
effect on the
11
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Fund.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other fifteen series of Ivy
Fund. For its services, IMI receives from Ivy US Blue Chip Fund an annual fee
equal to 0.75% of the Fund's average net assets. For the fiscal year ending
December 31, 1998, the other three Funds paid IMI a fee that was equal to the
following percentages of the Funds' respective average net assets:
- - Ivy Growth Fund, 0.85%;
- - Ivy Growth with Income Fund, 0.75%; and
- - Ivy US Emerging Growth Fund, 0.85%
- -- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into three different segments,
which are managed by the following individuals:
- - James W. Broadfoot, President of IMI and a Vice President of Ivy Fund, manages
the U.S. Emerging Growth segment of the Fund's portfolio. Before joining IMI
in 1990, Mr. Broadfoot was the principal in an investment counsel firm
specializing in emerging growth companies. He has over 25 years of
professional investment experience, holds an MBA from the Wharton School of
Business and is a Chartered Financial Analyst.
- - Barbara Trebbi, a Senior Vice President of IMI, manages the International
segment of the Fund's portfolio. She is also Managing Director of
International Equities and a member of the Ivy international portfolio
management team. Ms. Trebbi joined IMI in 1988 and has 11 years of
professional investment experience. She is a Chartered Financial Analyst and
holds a graduate diploma from the London School of Economics.
- - Paul P. Baran, a Senior Vice President of IMI, manages the core growth segment
of the Fund's portfolio. Before joining IMI, Mr. Baran was Senior Vice
President/Chief Investment Officer of Central Fidelity National Bank. He has
24 years of professional investment experience and is a Chartered Financial
Analyst. He has an MBA from Wayne State University.
IVY GROWTH WITH INCOME FUND: The Fund is managed by Paul P. Baran (see "Ivy
Growth Fund," above).
IVY US BLUE CHIP FUND: The Fund is managed by Paul P. Baran (see "Ivy Growth
Fund," above).
IVY US EMERGING GROWTH FUND: The Fund is managed by James W. Broadfoot (see "Ivy
Growth Fund," above).
12
<PAGE> 169
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer. Since Ivy Growth Fund
may invest in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Fund does not price their shares, the Fund's
share value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares.
- -- HOW TO BUY SHARES
Please read the sections below carefully before investing.
Advisor Class shares are offered through this Prospectus only to the following
investors:
- - trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- - 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 his
advice and other services an annual fee of at least 0.50% 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 0.50%
on the assets in the account;
- - officers and Trustees of Ivy Fund (and their relatives);
- - directors or employees of Mackenzie Investment Management Inc. or its
affiliates; and
- - 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.
The following investment minimums, sales charges and expenses apply.
<TABLE>
<S> <C>
Minimum initial investment*.............. $10,000
Minimum subsequent investment*........... $ 250
Initial sales charge..................... none
CDSC..................................... none
Service and distribution fees............ none
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
13
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund you wish to invest
in. You should note on the check that you wish to purchase Advisor Class shares
(see page 13 for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Highway
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in the Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required. When you redeem, IMSC will normally send redemption proceeds to
you on the next business day, but may take up to seven days (or longer in the
case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
14
<PAGE> 171
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - 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, unless you instruct otherwise.
- - The Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- - A Fund may make payment for redeemed shares in the form of securities of the
Fund taken at current values.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to
IMSC at one of the addresses on page 14 of this Prospectus. Be sure that all
registered owners listed on the account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: A check will mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: Your proceeds will be directly deposited into
your bank account.
15
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends annually. The Funds will distribute net investment
income and net realized capital gains, if any, at least once a year. The Funds
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 Internal Revenue Code of 1986,
as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you 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 a Fund during January of the following
calendar year. In certain years, you may be able to claim a credit or deduction
on your income tax return for your share of foreign taxes paid by your Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service ("IRS") that you are
subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Funds
under applicable state or local law.
16
<PAGE> 173
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Funds' financial performance for the past five years (or less if a Fund has
a shorter operating history), and reflects results for a single Fund share.
The total returns in the table represent the rate an investor would have
earned (or lost) each year on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Funds'
financial statements, is included in it's Annual Report to shareholders
(which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
April 30, 1998
(Commencement)
to December 31,
IVY GROWTH FUND 1998
- ------------------------------------------------------------------------------
<S> <C>
ADVISOR CLASS
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $20.36
---------------
Income (loss) from investment operations
Net investment income..................................... .03
Net gains or losses on securities (both realized and
unrealized)............................................. (.06)
---------------
Total from investment operations........................ (.03)
---------------
Less distributions
Dividends (from net investment income).................... .02
Distributions (from capital gains)........................ .40
---------------
Total distributions..................................... .42
---------------
Net asset value, end of period.............................. $19.91
===============
Total return (%)(a)......................................... (.14)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 347
Ratio of expenses to average net assets
Without expense reimbursement (%)(b)...................... 1.18
Ratio of net investment income to average net assets
(%)(b).................................................... .24
Portfolio turnover rate (%)................................. 59
</TABLE>
(a) Total return represents aggregate total return and does not reflect a sales
charge.
(b) Annualized
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
April 30, 1998
(Commencement)
to December 31,
IVY GROWTH WITH INCOME FUND 1998
- ------------------------------------------------------------------------------
<S> <C>
ADVISOR CLASS
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $13.88
---------------
Income (loss) from investment operations
Net investment income..................................... .05
Net gains or losses on securities (both realized and
unrealized)............................................. (.07)
---------------
Total from investment operations........................ (.02)
---------------
Less distributions
From net realized gain.................................... .28
---------------
Total distributions..................................... .28
---------------
Net asset value, end of period.............................. $13.58
===============
Total return (%)(a)......................................... (.36)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 339
Ratio of expenses to average net assets (%)(b).............. 1.20
Ratio of net investment income to average net assets
(%)(b).................................................... .68
Portfolio turnover rate (%)................................. 108
</TABLE>
(a) Total return represents aggregate total return and does not reflect a sales
charge.
(b) Annualized
17
<PAGE> 174
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
November 2, 1998
(Commencement)
to December 31,
IVY US BLUE CHIP FUND 1998
- -------------------------------------------------------------------------------
<S> <C>
ADVISOR CLASS
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $10.00
------
Income (loss) from investment operations
Net investment income(a)(b)............................... .01
Net gains or losses on securities (both realized and
unrealized)(a).......................................... .73
------
Total from investment operations........................ .74
------
Net asset value, end of period.............................. $10.74
======
Total return (%)(c)......................................... 7.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 537
Ratio of expenses to average net assets (%)
With expense reimbursement (%)(d)......................... 1.08
Without expense reimbursement (%)(d)...................... 5.99
Ratio of net investment income to average net assets
(%)(b)(d)................................................. .37
Portfolio turnover rate (%)................................. 3
</TABLE>
(a) Based on average shares outstanding.
(b) Net investment loss is net of expenses reimbursed by
Manager.
(c) Total return represents aggregate total return since
November 6, 1998 (when the Fund became available for
sale to the public) and does not reflect a sales
charge.
(d) Annualized
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
February 18, 1998
(Commencement)
to December 31,
IVY US EMERGING GROWTH FUND 1998
- --------------------------------------------------------------------------------
<S> <C>
ADVISOR CLASS
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $28.82
------
Income (loss) from investment operations
Net investment loss (a)................................... (.23)
Net gains or losses on securities (both realized and
unrealized)(a).......................................... 4.20
------
Total from investment operations........................ 3.97
------
Net asset value, end of period.............................. $32.79
======
Total return (%)(b)......................................... 13.78
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 740
Ratio of expenses to average net assets
Without expense reimbursement (%)(c)...................... 1.22
Ratio of net investment loss to average net assets (%)(c)... (1.00)
Portfolio turnover rate (%)................................. 67
</TABLE>
(a) Based on average shares outstanding.
(b) Total return represents aggregate total return and does
not reflect a sales charge.
(c) Annualized
19
<PAGE> 175
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
20
<PAGE> 176
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
21
<PAGE> 177
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
USE FOR ADVISOR
Ivy Mackenzie Services Corp., CLASS ONLY
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address__________________________________________________________________
City _________________________________________ State _______ Zip ________
Phone # (day) (___)_________________ Phone # (evening) (__)_____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence ______________
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): __________________
Social security # _____-____-_______ or Tax identification _____________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _________
Representative's name ___________________________________________________
Representative's # _________________ Representative's phone _____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for $__________ made payable to
the appropriate fund. Please invest it in Advisor Class Shares of the
following fund(s):
<TABLE>
<S> <C>
$ _______________ Ivy Growth Fund $ _______________ Ivy US Blue Chip Fund
$ _______________ Ivy Growth with Income Fund $ _______________ Ivy US Emerging Growth Fund
</TABLE>
B. FOR DEALER USE ONLY
Confirmed trade orders: _____________ ________________ __________
Confirm Number Number of Shares Trade Date
<PAGE> 178
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 account.
Fund name: ____________________________________________________
Account #: ____________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares in this account or a different Ivy fund
account.
Fund name: ____________________________________________________
Account #: ____________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $_____ for each time period indicated below and invest my
bank proceeds in Advisor Class shares of the following Ivy fund:
Fund name: ______________________________________________________
Account #: ______________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
_____________).
___ Semiannually (on the ___ day of the months of
___________ and ___________).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($250 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ______________________________________________________
Account #: ______________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___Semiannually (on the _____ day of the months of
_______________ and ________________).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional Advisor Class shares of a
different Ivy Fund:
Fund name: ______________________________________________________
Account #: ______________________________________________________
Note: A minimum balance of $10,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _____________________________________________
Account # (if applicable) ______________________________________________
Street _________________________________________________________________
City _______________________________State ______________Zip ____________
B. FED WIRE/EFT INFORMATION
Financial institution __________________________________________________
ABA # __________________________________________________________________
Account # ______________________________________________________________
Street _________________________________________________________________
City _______________________________State ______________Zip ____________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
_________________________________________ _______________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 179
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Growth Fund Advisor Class * 465897254
Ivy Growth with Income Fund Advisor Class * 465897247
Ivy US Blue Chip Fund Advisor Class * 465898864
Ivy US Emerging Growth Fund Advisor Class * 465897262
- ----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing
<PAGE> 180
'Ivy Funds Logo'
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and each Funds' annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Fund's performance during its most recent fiscal year. The SAI and
annual and semiannual reports are available upon request and without
charge from the Distributor at the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IUSADV0499
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
at 800.777.6472
regarding any other
inquiries about the Funds.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 181
Ivy Funds Logo This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 FIXED INCOME FUNDS
IVY BOND FUND
IVY INTERNATIONAL STRATEGIC BOND FUND
IVY MONEY MARKET FUND
Ivy Fund is a registered open-end investment company consisting of nineteen
separate portfolios. This Prospectus relates to the Class A, Class B and Class C
shares of the three funds listed above (the "Funds"), and the Class I shares of
Ivy Bond Fund and Ivy International Strategic Bond Fund. These two Funds also
offer Advisor Class shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not federally
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- -- CONTENTS
2 Ivy Bond Fund
4 Ivy International
Strategic Bond Fund
6 Ivy Money Market Fund
8 Additional information
about investment strategies
and risks
12 Management
13 Shareholder information
20 Financial highlights
25 Account application
<TABLE>
<S> <C> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
Mackenzie Logo
<PAGE> 182
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
BOND
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks a high level of current income.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in bonds rated in
the four highest rating categories used by Moody's and S&P and similar
investment grade fixed income securities.
To increase its potential yield, the Fund may invest up to 35% of its net assets
in low-rated debt securities (commonly referred to as "high yield" or "junk"
bonds). The Fund may also invest a portion of its assets in foreign debt
securities to diversify its holdings and to increase its potential return. Other
securities and investment techniques that the Fund's management team considers
important in achieving the Fund's investment objective (or in controlling the
Fund's exposure to risk) include zero coupon bonds.
The Fund's management team targets for investment companies whose
creditworthiness is believed to be stable or improving.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment even where "management risk" is
not a factor, so you could lose money if you redeem your Fund shares at a time
when interest rates are rising.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. As much as 35% of the Fund's
debt security holdings may be considered below investment grade (commonly
referred to as "high yield" or "junk" bonds). Low-rated debt securities are
considered speculative and could significantly weaken the Fund's returns if the
issuer defaults on its payment obligations.
FOREIGN SECURITY AND EMERGING-MARKET RISK: The Fund may invest up to 20% of its
net assets in foreign issuers. Investing in foreign securities involves a number
of economic, financial and political considerations that are not associated with
the U.S. market and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking current income, but who can
accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on September 6, 1985 compare with those of a broad
measure of market performance. The Fund's past performance is not an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
[CHART]
<S> <C>
'89' 15.11
'90' 4.26
'91' 14.45
'92' 8.16
'93' 15.45
'94' -4.1
'95' 17.41
'96' 8.06
'97' 11.87
'98' 0.00
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
Best quarter Q2 '89: 9.58%
Worst quarter Q1 '90: (4.52%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS# December 31, 1998
----------------------------------------------------------------------------------------------
MORNINGSTAR
-------------------------------
CORPORATE MULTI- LONG-
BOND SECTOR TERM
GENERAL BOND BOND
CLASS A CLASS B CLASS C CLASS I*** UNIVERSE UNIVERSE UNIVERSE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Past year............ (4.75%) (5.77%) (1.81%) n/a 6.83% 1.20% 6.53%
Past 5 years......... 5.33% n/a n/a n/a 6.29% 5.81% 6.98%
Past 10 years........ 8.32% n/a n/a n/a 8.67% 8.45% 9.42%
Since inception:
Class B*............. n/a 6.15% n/a n/a 7.27% 7.21% 8.21%
Class C**............ n/a n/a 7.04% n/a 8.09% 7.07% 9.25%
</TABLE>
# Performance figures reflect any applicable sales charges.
* The inception date for the Fund's Class B shares was April
1, 1994.
** The inception date for the Fund's Class C shares is April
30, 1996. Index performance calculated from May 1, 1996.
*** The Fund has had no outstanding Class I shares.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- ---------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price).................. 4.75% none none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price).................. none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption fee*......... none none none none
Exchange fee............ none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I**
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees*....... 0.75% 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00% none
Other expenses......... 0.39% 0.38% 0.37% 0.30%
Total annual Fund
operating expenses..... 1.39% 2.13% 2.12% 1.05%
</TABLE>
*Management Fees are reduced to 0.50% for net assets over $100
million.
**The Fund has had no outstanding Class I shares. Percentages shown
are estimates based on expenses for Class A shares.
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 708 $ 716 $ 216 $ 315 $ 215 $ 107
3rd 990 967 667 664 664 334
5th 1,292 1,344 1,144 1,139 1,139 579
10th 2,148 2,274 2,274 2,452 2,452 1,283
</TABLE>
3
<PAGE> 184
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
STRATEGIC
BOND FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks total return and, consistent with that objective, to maximize
current income.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in a managed portfolio of foreign
bonds.
The Fund may also invest in U.S. bonds. The types of debt securities the Fund
may hold include corporate, government, and mortgage or asset backed securities.
At least 65% of the value of the Fund's portfolio is expected to be rated in the
four highest rating categories used by Moody's and S&P.
Among the other securities and investment techniques that the Fund's manager
considers important in achieving the Fund's investment objective (or in
controlling the Fund's exposure to risk) are:
- - low rated debt securities (commonly referred to as "high yield" or "junk"
bonds); and
- - derivative investment techniques (such as options, futures, interest rate and
credit swaps, and foreign currency exchange transactions).
The Fund's manager invests in bonds and bond markets that are believed to be
undervalued relative to other issuers or markets. In selecting bonds for the
Fund's portfolio, the manager will consider yields, credit quality and the
fundamental outlook for currency and interest rate trends in different parts of
the world, and may also take into account the ability to hedge currency and
local bond price risk.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment even where "management risk" is
not a factor, so you could lose money if you redeem your Fund shares at a time
when interest rates are rising.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Many of the Fund's debt security
holdings may be considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). Low-rated debt securities are considered speculative
and could significantly weaken the Fund's returns if the issuer defaults on its
payment obligations.
NON-DIVERSIFICATION RISK: The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, and may therefore invest a greater percentage of
its assets in a particular issuer than a "diversified" fund. As a result, the
Fund may also be more susceptible than a diversified fund to the price movements
of certain securities it holds in its portfolio.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
4
<PAGE> 185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The risks of investing in foreign securities are more acute in countries
with new or developing economies.
DERIVATIVES RISK: The Fund may, but is not required to, use a range of
derivative investment techniques to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements) or to enhance potential gain. The use of
these derivative investment techniques involves a number of risks,
including the possibility of default by the counterparty to the transaction
and, to the extent the judgment of the Fund's manager as to certain market
movements is incorrect, the risk of losses that are greater than if the
derivative technique(s) had not been used.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking a mix of total return and
current income, but who can accept potentially dramatic fluctuations in
capital value in the short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
-- PERFORMANCE INFORMATION
The Fund commenced operations on May 3, 1999, therefore, no performance
information is available.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
- ------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................ 4.75% none none none
Maximum deferred sales
charge (load)(as a
percentage of purchase
price)................ none 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested
dividends............. none none none none
Redemption fee*....... none none none none
Exchange fee.......... none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees...... 0.75% 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1)
fees................. 0.25% 1.00% 1.00% none
Other expenses....... 0.50% 0.50% 0.50% 0.41%
Total annual Fund
operating
expenses*............ 1.50% 2.25% 2.25% 1.16%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.25% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 1.75% of the Fund's average net
assets.
- -------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 719 $ 728 $ 228 $ 328 $ 228 $118
3rd 1,121 1,106 806 806 806 475
</TABLE>
5
<PAGE> 186
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
MONEY
MARKET FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks to obtain as high a level of current income as is consistent with
the preservation of capital and liquidity.
- -- PRINCIPAL INVESTMENT STRATEGIES
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.
The Fund's emphasis on securities with relatively short-term maturities is
designed to enable the Fund to maintain a constant net asset value of $1.00 per
share.
Among the types of money market instruments that are likely to be included in
the Fund's portfolio are:
- - debt securities issued or guaranteed by the U.S. Government;
- - obligations of domestic banks and savings and loans associations (including
certificates of deposit and bankers' acceptances);
- - high-quality commercial paper;
- - high quality short-term corporate notes, bonds and debentures; and
- - short-term repurchase agreements involving U.S. Government securities.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other money market funds.
MARKET RISK: An investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Thus,
although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
INTEREST RATE RISK: Many of the Fund's portfolio holdings are susceptible to
decline in a rising interest rate environment.
CREDIT RISK: The issuers of the Fund's portfolio holdings could fail to meet
their obligations on interest payments and/or principal repayments, which could
cause the Fund to lose money.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking a combination of current
income and stability of capital.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
6
<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since its inception on April 3, 1987 compare with those of a broad measure
of market performance. The Fund's past performance is not an indication of
how the Fund will perform in the future.
<TABLE>
<CAPTION>
TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
[CHART]
<S> <C>
'89' 8.87
'90' 7.69
'91' 5.16
'92' 2.81
'93' 2.42
'94' 4.21
'95' 4.80
'96' 4.47
'97' 4.60
'98' 4.51
</TABLE>
Best quarter Q3 '90: 1.94%
Worst quarter Q3 '98: 0.38%
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Past year................................................... 4.51% 4.59% 4.55%
Past 5 years................................................ 4.45% n/a n/a
Past 10 years............................................... 4.88% n/a n/a
Since inception*............................................ n/a 4.64% 5.30%
</TABLE>
*The inception dates for the Fund's three classes of shares were as
follows: Class A, April 3, 1987; Class B, January 1, 1996; and Class C,
April 30, 1996.
The Fund's 7-day yield as of December 31, 1998 was 4.11%.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
- -----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................... none none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)*.................. none none none
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none
Redemption fee**......... none none none
Exchange fee............. none none none
</TABLE>
*No contingent deferred sales charge ("CDSC") applies to your
purchase of Fund shares. If, however, you exchange shares of
another Ivy fund that are subject to a CDSC for shares of the
Fund, the CDSC may carry over to your investment in the Fund and
be assessed when you redeem your Fund shares (depending on how
much time has elapsed since your original purchase date).
**If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------
<S> <C> <C> <C>
Management fees...... 0.40% 0.40% 0.40%
Distribution and/or
service (12b-1)
fees................. none none none
Other expenses....... 1.02% 0.91% 0.96%
Total annual Fund
operating expenses... 1.42% 1.31% 1.36%
Expenses
reimbursed*.......... 0.55% 0.55% 0.55%
Net Fund operating
expenses*............ 0.87% 0.76% 0.81%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses do not exceed
0.85% of the Fund's average net assets, when calculated at the Fund
level,. For each of the following nine years, the Investment
Manager will ensure that these expenses do not exceed 1.25% of the
Fund's average net assets.
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- ----------------------------------
YEAR CLASS A CLASS B CLASS C
- ----------------------------------
<S> <C> <C> <C>
1st $ 659 $ 78 $ 83
3rd 917 329 344
5th 1,196 600 626
10th 1,988 1,404 1,431
</TABLE>
7
<PAGE> 188
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY BOND FUND: The Fund seeks to achieve its investment objective of a high
level of current income by investing primarily in investment grade corporate
bonds (which are rated Baa or higher by Moody's or BBB or higher by S&P) and
U.S. Government securities that mature in more than 13 months. The Fund may
invest up to 35% of its net assets in low-rated debt securities (commonly
referred to as "high yield" or "junk" bonds). As much as 20% of the Fund's
portfolio may be invested in foreign securities.
The Fund's manager targets for investment issuers with stable or improving
credit profiles. Individual securities are selected on the basis of factors such
as comparative yields and credit quality, and where appropriate,
country-specific currency and interest rate trends.
IVY INTERNATIONAL STRATEGIC BOND FUND: The Fund seeks to achieve its primary
investment objective of total return, and secondarily current income, by
investing in the debt securities of issuers in any nation. The Fund's portfolio
is actively managed to limit its exposure to individual country, sector,
interest rate and currency risks. The Fund may, however, invest more than 5% of
a portion of its assets in a single issuer (see "Non-diversification risk" on
page 4). Individual securities are selected based on factors such as yields,
credit quality, and the fundamental outlook for country-specific currency and
interest rate trends.
IVY MONEY MARKET FUND: The Fund seeks to achieve its investment objective of 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
debt investments are required to present minimal credit risk and be included in
one of the two highest short-term rating categories that apply to debt
securities. By purchasing these types of securities, the Fund will attempt to
maintain a constant net asset value of $1.00 per share (although there is no
guarantee that the Fund's efforts will be successful). The Fund's portfolio is
actively monitored on a daily basis to maintain competitive yields.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: The following table identifies the investment techniques that each
Fund's manager considers important in achieving the Fund's investment objective
or in managing its exposure to risk (and that could therefore have a significant
effect on a Fund's returns). Following the table is a description of the general
risk characteristics of these investment techniques. Other investment methods
that the Funds may use (such as derivative investments), but that are not likely
to play a key role in their overall investment strategies, are described in the
Funds' Statement of Additional Information (see back cover page for information
on how you can receive a free copy).
8
<PAGE> 189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
IVY INTERNATIONAL IVY MONEY
INVESTMENT IVY BOND STRATEGIC MARKET
TECHNIQUE FUND BOND FUND FUND
- ---------------------------------------------------------------
<S> <C> <C> <C>
Debt securities...... X X X
Low-rated debt
securities........... X X
Sovereign debt....... X
Zero coupon bonds.... X
Foreign securities... X
Emerging markets..... X X
Foreign currencies... X
Derivatives.......... X
Illiquid
securities......... X X
Borrowing............ X X X
Temporary defensive
positions............ X X
</TABLE>
RISK CHARACTERISTICS:
- - DEBT SECURITIES, IN GENERAL: Investing in debt securities involves both
interest rate and credit risk. The value of debt instruments generally
increase as interest rates decline. Conversely, rising interest rates tend to
cause the value of debt securities to decrease. The Fund's portfolio is
therefore susceptible to losses in a rising interest rate environment. The
market value of debt securities also tends to vary according to the relative
financial condition of the issuer. Bonds with longer maturities also tend to
be more volatile than bonds with shorter maturities.
- - LOW-RATED DEBT SECURITIES: In general, low-rated debt securities (commonly
referred to as "high yield" or "junk" 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.
For this reason, these bonds are considered speculative and could
significantly weaken the Funds' returns.
- - SOVEREIGN DEBT SECURITIES: Sovereign debt is issued by foreign governments.
For a variety of reasons (such as cash flow problems, limited foreign
reserves, and political constraints), the governmental entity that controls
the repayment of sovereign debt may not be able or willing to repay the
principal or interest when due. A governmental entity's ability to honor its
debt obligations to the investing Fund may also be contingent on its receipt
from others (such as the International Monetary Fund and more solvent foreign
governments) of specific disbursements, which may in turn be conditioned on
the perceived health of the governmental entity's economy and/or its
implementation of economic reforms. If any of these conditions fail, the Fund
could lose the entire value of its investment for an indefinite period of
time.
- - 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). Because the income from zero coupon
bonds is recognized currently for Federal income tax purposes, the amount of
the unpaid, accrued interest a fund generally would be required to distribute
as dividends includes that income (even though the fund has not actually
received any income proceeds). The fund could be forced to sell other
portfolio securities at a disadvantageous time and/or price in order to meet
its distribution obligations.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect a Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets.
Other factors that can affect the value of a Fund's foreign investments include
the comparatively weak supervision and regulation by some foreign governments of
securities exchanges, brokers and issuers, and the fact that many foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards. It may also be difficult to obtain reliable information
about the securities and business operations of certain foreign issuers.
Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting
9
<PAGE> 190
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
in a loss if the value of the securities subsequently declines).
- - FOREIGN CURRENCIES: Many of the securities that Ivy International Strategic
Bond Fund buys are denominated in foreign currencies and the value of the
Fund's investments, as measured in U.S. dollars, may be affected unfavorably
by changes in foreign currency exchange rates and exchange control
regulations. Currency conversions can also be costly.
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing economies. Among these
additional risks are the following:
- securities that are even less liquid and more volatile than those in more
developed foreign countries;
- less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- increased settlement delays;
- unusually high inflation rates (which in extreme cases can cause the value
of a country's assets to erode sharply);
- unusually large currency fluctuations and currency conversion costs; and
- high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DERIVATIVE INVESTMENT TECHNIQUES: Ivy International Strategic Bond Fund may,
but is not required to, use certain derivative investment techniques to hedge
various market risks (such as interest rates, currency exchange rates and
broad or specific market movements) or to enhance potential gain. Among the
derivative techniques the Fund might use are options, futures, forward foreign
currency contracts and foreign currency exchange transactions.
Using put and call options could cause the Fund to lose money by forcing the
sale or purchase of portfolio securities at inopportune times or for prices
higher (in the case of put options) or lower (in the case of call options) than
current market values, by limiting the amount of appreciation the Fund can
realize on its investments, or by causing the Fund to hold a security it might
otherwise sell.
Futures transactions (and related options) involve other types of risks. For
example, the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of the Fund
could cause losses on the hedging instrument that are greater than gains in the
value of the Fund's position. In addition, futures and options markets may not
be liquid in all circumstances and certain over-the-counter options may have no
markets. As a result, the Fund might not be able to close out a transaction
before expiration without incurring substantial losses (and it is possible that
the transaction cannot even be closed). In addition, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium.
Foreign currency transactions (such as forward foreign currency contracts) can
cause investment losses in a variety of ways. For example, changes in currency
exchange rates may result in poorer overall performance for the Fund than if it
had not engaged in such transactions. There may also be an imperfect correlation
between the Fund's portfolio holdings of securities denominated in a particular
currency and the forward contracts entered into by the Fund. An imperfect
correlation of this type may prevent the Fund from achieving the intended hedge
or expose the Fund to the risk of currency exchange loss.
- - ILLIQUID SECURITIES: "Illiquid securities" are assets that may not be disposed
of in the ordinary course of business within seven days at roughly the value
at which the investing fund has valued the assets. These may be "restricted
securities," which cannot be sold to the public without registration under the
Securities Act of 1933 (in the absence of an exemption) or because of other
legal or contractual restrictions on resale. Thus, while illiquid securities
may offer the potential for higher returns than more readily marketable
securities, there is a risk that the investing fund will not be able to
dispose of them promptly at an acceptable price.
10
<PAGE> 191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - BORROWING: For temporary or emergency purposes, each Fund may borrow up to a
specific percentage of its total assets from qualified banks (10% in the case
of Ivy Bond Fund and Ivy Money Market Fund, and 20% in the case of Ivy
International Strategic Bond Fund). Borrowing may exaggerate the effect on a
Fund's share value or any increase or decrease in the value of the securities
it holds. Money borrowed will also be subject to interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: Each Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When a
Fund assumes such a defensive position it may not achieve its investment
objective.
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: The Funds may have investments in Europe. On January 1,
1999, a new European currency called the "euro" was introduced and adopted for
use by eleven European countries. The transition to daily usage of the euro will
occur during the period from January 1, 1999 through December 31, 2001, at which
time euro bills and coins will be put into circulation. Certain European Union
members, including the United Kingdom, did not officially implement the euro on
January 1, 1999 and may cause market disruptions when and if they decide to do
so. Should this occur, the Funds could experience investment losses.
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
11
<PAGE> 192
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other sixteen series of Ivy
Fund. For the Funds' fiscal year ending December 31, 1998, the Funds paid IMI a
fee that was equal to the following percentages of the Funds' respective average
net assets:
- - Ivy Bond Fund, 0.66%;
- - Ivy Money Market Fund, 0.40%.
Ivy International Strategic Bond Fund will pay IMI a fee equal to 0.75% of the
Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY BOND FUND AND IVY MONEY MARKET FUND: The Funds are managed by IMI's Fixed
Income Team. Among the research sources and techniques that team members use
during the investment decision-making process are:
- - issuer financial statements;
- - discussions with company managers and Wall Street analysts;
- - credit rating agency opinions; and
- - various financial publications.
IVY INTERNATIONAL STRATEGIC BOND FUND: Richard A. Gluck, Vice President of IMI,
is the Fund's portfolio manager. Before joining IMI, Mr. Gluck was a Vice
President and portfolio manager at Oppenheimer Capital. He has been managing
global fixed income funds since 1989. Mr. Gluck holds a Masters Degree in
management with a concentration in finance from the M.I.T. Sloan School of
Management.
Mr. Gluck is supported by the members of IMI's Fixed Income Team, which is
responsible for providing information on regional and country-specific economic
and political developments and monitoring individual companies. Team members use
a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
12
<PAGE> 193
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
Each purchase and redemption order is subject to any applicable sales charge
(see "Choosing the appropriate class of shares" at right).
Ivy International Strategic Bond Fund normally invests in securities that are
listed on foreign exchanges that may trade on weekends or other days when the
Fund does not price its shares. Therefore, the Funds' share value may change on
days when shareholders will not be able to purchase or redeem shares.
IVY MONEY MARKET FUND: The Fund values all of its portfolio securities using the
"amortized cost method," which involves valuing each security at its initial
cost to the Fund and then assuming a constant rate of accretion of discount or
amortization of premium. Cash and receivables are valued at their realizable
amounts.
ALL FUNDS: The number of shares you receive when you place a purchase or
exchange order, and the payment you receive after submitting a redemption
request, is based on a Fund's net asset value ("NAV") next determined after your
instructions are received in proper form by Ivy Mackenzie Services Corp.
("IMSC") (the Fund's transfer agent) or by your registered securities dealer.
Each purchase and redemption order is subject to any applicable sales charge
(see "Choosing the appropriate class of shares" below).
- -- HOW TO BUY SHARES
Please read these sections carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES: The essential features of the Funds'
different classes of shares are described below. If you do not specify on your
Account Application which class of shares you are purchasing, it will be assumed
that you are purchasing Class A shares.
IVY BOND FUND AND IVY INTERNATIONAL STRATEGIC BOND FUND: The Fund's have each
adopted separate distribution plans pursuant to Rule 12b-1 under the 1940 Act
for their Class A, B and C shares that allow the Funds to pay distribution and
other fees for the sale and distribution of its shares and for services provided
to shareholders. Because these fees are paid out of the Funds' assets on an
ongoing basis, over time they will increase the cost of your investment and may
cost you more than paying other types of sales charges.
- - CLASS A SHARES: Class A shares of Ivy Bond Fund and Ivy International
Strategic Bond Fund are sold at net asset value plus a maximum sales charge of
4.75% (the "offering price"). The sales charge may be reduced or eliminated if
certain conditions are met (see "Additional
13
<PAGE> 194
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
purchase information"). Class A shares are subject to a 0.25% Rule 12b-1
service fee.
- - CLASS B SHARES: Class B shares of Ivy Bond Fund and Ivy International
Strategic Bond Fund are offered at net asset value, without an initial sales
charge, but subject to a contingent deferred sales charge ("CDSC") that
declines from 5.00% to zero on certain redemptions within six years of
purchase. Class B shares are subject to a 0.75% Rule 12b-1 distribution fee
and a 0.25% Rule 12b-1 service fee, and convert automatically into Class A
shares eight years after purchase.
- - CLASS C SHARES: Class C shares are offered at net asset value, without an
initial sales charge, but subject to a CDSC of 1.00% for redemptions within
the first year of purchase. Class C shares are subject to a 0.75% Rule 12b-1
distribution fee and a 0.25% Rule 12b-1 service fee.
- - CLASS I SHARES: Class I shares are offered to certain classes of investors at
net asset value, without any sales load or Rule 12b-1 fees.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class of Ivy Bond Fund and Ivy International
Strategic Bond Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000 $5,000,000
Minimum subsequent
investment*.......... $100 $100 $100 $10,000
Initial sales
charge............... Maximum 4.75%, None None None
with options
for a reduction
or waiver
CDSC................. None, except on Maximum 5.00%, 1.00% for the None
certain NAV declines over first year
purchases six years
Service and
distribution fees.... 0.25% service 0.75% 0.75% None
fee distribution distribution
fee and 0.25% fee and 0.25%
service fee service fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
IVY MONEY MARKET FUND: The following table displays the various investment
minimums, sales charges and expenses that apply to each class of Ivy Money
Market Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum initial
investment*................ $1,000 $1,000 $1,000
Minimum subsequent
investment*................ $100 $100 $100
Initial sales charge....... None None None
CDSC....................... None None, except on None, except on
shares purchased shares purchased
with proceeds from with proceeds from
the exchange of the exchange of
other Ivy Fund other Ivy fund
shares that would shares that would
otherwise have been otherwise have been
subject to a CDSC subject to a CDSC
(maximum 5.00%, (maximum 1.00% for
declines over six the first year)
years)
Service and distribution
fees....................... None None None
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- ADDITIONAL PURCHASE INFORMATION FOR IVY BOND FUND AND IVY INTERNATIONAL
STRATEGIC BOND FUND
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth below
(which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED 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>
*A CDSC of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- - "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher) of all Ivy Fund Class A shares you
own.
14
<PAGE> 195
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the following
methods:
- - through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- - under certain qualified retirement plans;
- - as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- - as an employee of a selected dealer; or
- - through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Funds 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 SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc. ("IMDI"),
the Fund's distributor, may pay the dealer or agent (out of IMDI's own
resources) for its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASE AMOUNT COMMISSION
- --------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those 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 time period.
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by the
Distributor. This privilege will apply only to Class A shares of a Fund that are
purchased using proceeds obtained by such clients through redemption of another
mutual fund's shares on which a sales charge was paid. Purchases must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
of purchase.
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 you redeem your Class C
shares within one year of purchase they will be subject to a CDSC of 1.00%, and
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the following rates:
<TABLE>
<CAPTION>
- ----------------------------------------------------
CDSC AS A PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- ----------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares 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. No charge will be assessed on increases in account value
above the original purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - Shares held more than six years;
- - Shares acquired through reinvestment of dividends and distributions;
- - Shares subject to the lowest CDSC percentage, on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation which is
not subject to a CDSC; redeemed first, then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
15
<PAGE> 196
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
The CDSC for Class B shares is waived for:
- - Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- - Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- - Redemptions resulting from a tax-free return of excess contribution to an IRA.
- - Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- - Withdrawals through the Systematic Withdrawal Plan of up to 12% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for Federal income
tax purposes. Class C shares do not have a similar conversion privilege.
CLASS I SHARES: Class I shares are offered 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.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check the class of shares you wish to purchase
(see page 14 for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
16
<PAGE> 197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
on page 16 of this Prospectus. Be sure that all registered owners listed on
the account sign the request. Medallion signature guarantees and supporting
legal documentation may be required. When you redeem, IMSC will normally send
redemption proceeds to you on the next business day, but may take up to seven
days (or longer in the case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within six years of purchase, and to Class C shares that are redeemed
within one year of purchase.
- - If you own shares of more than one class of the Fund, the Fund will redeem
first the shares having the highest 12b-1 fees, unless you instruct otherwise.
- - Any shares subject to a CDSC will be redeemed last unless you specifically
elect otherwise.
- - Shares will be redeemed in the order described under "Additional Purchase
Information--Class B and Class C Shares", above.
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
17
<PAGE> 198
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information" at right).
IVY MONEY MARKET FUND: Class A shareholders of Ivy Money Market 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. Class B (or Class C) shareholders of Ivy Money
Market Fund 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, subject to the CDSC schedule 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 of the fund from which the exchange
was made, but will reflect the time the shares are held in the Ivy Money Market
Fund.
ALL FUNDS:
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 16 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or a
capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
18
<PAGE> 199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dividends ordinarily will vary from one class to another. Ivy Bond Fund and Ivy
International Strategic Bond Fund intend to declare and pay dividends monthly.
Ivy Money Market Fund intends to declare dividends daily and pay accrued amounts
monthly. The Funds will distribute net realized capital gains, if any, at least
once a year. The Funds 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
Internal Revenue Code of 1986, as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you 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 a Fund during January of the following
calendar year. In certain years, you may be able to claim a credit or deduction
on your income tax return for your share of foreign taxes paid by your Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from a Fund under
applicable state or local law.
19
<PAGE> 200
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Funds' financial performance for the past five years (or less if a Fund has
a shorter operating history) and reflects results for a single Fund share.
Ivy International Strategic Bond Fund commenced operations on May 3, 1999,
and accordingly, no financial information is presented for that Fund. The
total returns in the table represent the rate an investor would have earned
(or lost) each year on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, is included in its Annual Report to shareholders (which is
available upon request).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
IVY BOND FUND ----------------------------------------------------------------------------
for the
six months for the
for the year ended year ended
ended December 31, December 31, June 30,
- --------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1994
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34
----------------------------------------------------------------------------
Income from investment operations
Net investment income.................... .69 .80 .72 .67(a) .33(a) .63
Net gains or losses on securities (both
realized and unrealized)............... (.69) .42 .03 .84 (.29) (.60)
----------------------------------------------------------------------------
Total from investment operations......... -- 1.22 .75 1.51 .04 .03
----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............. .68 .80 .72 .63 .32 .61
In excess of net investment income..... -- -- .01 -- -- --
Distributions
From capital gains..................... -- -- -- -- -- .38
In excess of capital gains............. -- -- -- -- .09 --
Returns of capital....................... -- -- -- .11 -- --
----------------------------------------------------------------------------
Total distributions.................... .68 .80 .73 .74 .41 .99
----------------------------------------------------------------------------
Net asset value, end of period............. $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total return (%)........................... .00(b) 11.87(b) 8.06(b) 17.41(b) .43(c) .00(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 109,445 $106,497 $97,881 $108,840 $110,232 $120,073
Ratio of expenses to average net assets
With expense reimbursement (%)........... -- -- -- 1.54 1.50(d) --
Without expense reimbursement (%)........ 1.39 1.47 1.56 1.54 1.52(d) 1.45
Ratio of net investment income to average
net assets (%)........................... 6.88 7.08 7.36 7.09(a) 6.92(a)(d) 6.19
Portfolio turnover rate (%)................ 43 71 90 93 44 78
</TABLE>
20
<PAGE> 201
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
for the period for the period
for the six April 1, 1994 April 30, 1996
for the year ended months ended (Commencement) for the year ended (Commencement)
December 31, December 31, to June 30, December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1994 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 9.82 $ 10.24 $ 9.82 $9.44
- ----------------------------------------------------------------------------------------------------------------------------
.59 .68 .64 .60(a) .30(a) .10 .60 .64 .39
(.67) .46 .04 .84 (.29) (.32) (.68) .48 .43
- ----------------------------------------------------------------------------------------------------------------------------
(.08) 1.14 .68 1.44 .01 (.22) (.08) 1.12 .82
- ----------------------------------------------------------------------------------------------------------------------------
.59 .72 .64 .56 .29 .14 .60 .70 .39
.02 -- .02 -- -- -- .01 -- .05
-- -- -- -- -- .08 -- -- --
-- -- -- -- .09 -- -- -- --
-- -- -- .11 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
.61 .72 .66 .67 .38 .22 .61 .70 .44
- ----------------------------------------------------------------------------------------------------------------------------
$ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 9.55 $10.24 $9.82
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
(.81)(b) 11.12(b) 7.25(b) 16.54(b) .06(c) (2.24)(c) (.81)(b) 11.11(b) 8.81(c)
$42,166 $18,499 $5,300 $5,184 $2,420 $ 761 $11,266 $6,580 $ 618
-- -- -- 2.29 2.25(d) -- -- -- --
2.13 2.21 2.29 2.29 2.27(d) 2.20(d) 2.12 2.20 2.35(d)
6.14 6.35 6.62 6.34(a) 6.17(a)(d) 5.44(d) 6.15 6.35 6.56(d)
43 71 90 93 44 78 43 71 90
(a) Net investment
income is net of
expenses reimbursed
by manager.
(b) Total return does
not reflect a sales
charge.
(c) Total return
represents aggregate
total return and does not
reflect a sales charge.
(d) Annualized
</TABLE>
21
<PAGE> 202
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
IVY MONEY MARKET FUND --------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------
Income from investment operations
Net investment income (a)............................... .05 .05 .04 .05 .04
Less distributions
Dividends (from net investment income).................. (.05) (.05) (.04) (.05) (.04)
--------------------------------------------------------------
Net asset value, end of period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%).......................................... 4.51 4.60 4.47 4.80 4.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $19,103 $15,385 $21,359 $24,609 $26,827
Ratio of expenses to average net assets
With expense reimbursement (%).......................... .87 .88 .86 .85 .85
Without expense reimbursement (%)....................... 1.42 1.57 1.86 1.39 1.24
Ratio of net investment income to average net assets
(%)(a).................................................. 4.50 4.60 4.47 4.91 3.29
</TABLE>
22
<PAGE> 203
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(a) Net investment
income is net of
expenses reimbursed
by manager.
(b) Total return repre-
sents aggregate total
return.
(c) Annualized
CLASS B CLASS C
-----------------------------------------------------------------------------------
from April 30, 1996
for the year ended for the year ended (Commencement)
December 31, December 31, to December 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------
.05 .05 .05 .05 .05 .03
(.05) (.05) (.05) (.05) (.05) (.03)
-----------------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
4.59 4.77 4.57 4.55 4.78 4.78(b)
$6,636 $3,812 $3,474 $ 423 $ 405 $ 74
.76 .70 .77 .81 .70 .56(c)
1.31 1.39 1.77 1.36 1.39 1.56(c)
4.61 4.77 4.57 4.56 4.78 4.78(c)
</TABLE>
23
<PAGE> 204
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
24
<PAGE> 205
Account
Application
FUND USE ONLY
__________________________
Account Number
__________________________
Dealer/Branch/Rep
__________________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for
retirement accounts for which Ivy Fund (IBT) is
custodian.
1 REGISTRATION
Name ___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Address ________________________________________________________________
City ___________________________________ State _____________ Zip _______
Phone # (day) (____)_____________ Phone # (evening) (___)_______________
___ Individual ___ UGMA/UTMA ___ Sole proprietor
___ Joint tenant ___ Corporation ___ Trust
___ Estate ___ Partnership ___ Other
Date of trust _____________________ Minor's state of residence _________
2 TAX I.D.
Citizenship: ___ U.S. ___ Other (please specify):___________________
Social security # _______-____-_______ or Tax identification #________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 __________
Representative's name __________________________________________________
Representative's # _________________ Representative's phone # __________
Authorized signature of dealer _________________________________________
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) for $_____________ made payable
to the appropriate fund. Please invest it in:
__________________________________ Class A
__________________________________ Class B
__________________________________ Class C
__________________________________ Class I shares
("*" Funds only)
of the following fund(s):
<TABLE>
<S> <C>
$ _____________ Ivy Bond Fund* $ ------------- Ivy Money Market Fund
$ _____________ Ivy International Strategic Bond Fund*
</TABLE>
B. I qualify for a reduction or elimination of the 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 the account(s) listed below.
<TABLE>
<S> <C>
Fund name: ___________________________________ Fund name: _________________________________
Account #: ___________________________________ Account #: _________________________________
</TABLE>
If establishing a Letter of Intent, you will need to purchase Class A
shares over a 13-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).
____ $100,000 ____ $250,000 ____ $500,000
C. FOR DEALER USE ONLY
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: __________________ ___________________ _____________________
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 206
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 the same class of a different Ivy fund account.
Fund name: ________________________________________________________
Account #: ________________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a
different Ivy fund account.
Fund name: ________________________________________________________
Account #: ________________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: ___ the address listed in the registration
___ the special payee listed in Section 7A (by mail)
___ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $ _______ for each time period indicated below and invest my
bank proceeds into the following Ivy fund:
Fund name: ________________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: ________________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
_____________________).
___ Semiannually (on the ___ day of the months of
_____ and _____).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($50 minimum) $___ for each time period indicated
below from the following Ivy Fund account:
Fund name: ________________________________________________________
Share class: __ Class A __ Class B __ Class C
Account #: ________________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the ___ day of the month of
_________-).
___ Semiannually (on the ___ day of the months of
___ and ___).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional shares of the same class of a
different Ivy fund:
Fund name: ________________________________________________________
Account #: ________________________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _______________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City __________________________________________ State ______ Zip _________
B. FED WIRE/EFT INFORMATION
Financial institution ____________________________________________________
ABA # ____________________________________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City __________________________________________ State ______ Zip _________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
_______________________________________ ___________________________
Signature of Owner, Custodian, Trustee or Date
Corporate Officer
DETACH ON PERFORATION TO MAIL
(Remember to sign Section 8)
<PAGE> 207
* Symbol not assigned as of this printing
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Bond Fund Class A MCFIX 465897791
Ivy Bond Fund Class B IVBBX 465897783
Ivy Bond Fund Class C IVBCX 465897668
Ivy Bond Fund Class I * 465897775
Ivy International Strategic Bond Fund Class
A * 465898104
Ivy International Strategic Bond Fund Class
B * 465898203
Ivy International Strategic Bond Fund Class
C * 465898302
Ivy International Strategic Bond Fund Class
I * 465898401
Ivy Money Market Fund Class A IVMXX 465897684
Ivy Money Market Fund Class B IVBXX 465897676
Ivy Money Market Fund Class C IVCXX 465897551
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 208
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999 (the "SAI"), which is incorporated by reference into this
Prospectus, and the Funds' annual and semiannual reports to
shareholders. Each Fund's annual report includes a discussion of the
market conditions and investment strategies that significantly affected
the Fund's performance during its most recent fiscal year. The SAI and
annual and semiannual reports are available upon request and without
charge from the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE> 209
Ivy Funds Logo
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 FIXED INCOME FUNDS ADVISOR CLASS SHARES
IVY BOND FUND
IVY INTERNATIONAL STRATEGIC BOND FUND
Ivy Fund is a registered open-end investment company consisting
of nineteen separate portfolios. This Prospectus relates to the
Advisor Class shares of the two funds listed above (the "Funds").
The Funds also offer Class A, Class B, Class C and Class I
shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary
is a criminal offense.
Investments in the Funds are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
-- CONTENTS
2 Ivy Bond Fund
4 Ivy International
Strategic Bond Fund
6 Additional information
about investment strategies
and risks
10 Management
11 Shareholder information
14 Financial highlights
17 Account application
<TABLE>
<S> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
Mackenzie Logo
<PAGE> 210
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
BOND
FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks a high level of current income.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in bonds rated in
the four highest rating categories used by Moody's and S&P and similar
investment-grade fixed income securities.
To increase its potential yield, the Fund may invest up to 35% of its net assets
in low-rated debt securities (commonly referred to as "high yield" or "junk"
bonds). The Fund may also invest a portion of its assets in foreign debt
securities to diversify its holdings and to increase its potential return. Other
securities and investment techniques that the Fund's management team considers
important in achieving the Fund's investment objective (or in controlling the
Fund's exposure to risk) include zero coupon bonds.
The Fund's management team targets for investment companies whose
creditworthiness is believed to be stable or improving.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment even where "management risk" is
not a factor, so you could lose money if you redeem your Fund shares at a time
when interest rates are rising.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. As much as 35% of the Fund's
debt security holdings may be considered below investment grade (commonly
referred to as "high yield" or "junk" bonds). Low-rated debt securities are
considered speculative and could significantly weaken the Fund's returns if the
issuer defaults on its payment obligations.
FOREIGN SECURITY AND EMERGING-MARKET RISK: The Fund may invest up to 20% of its
net assets in foreign issuers. Investing in foreign securities involves a number
of economic, financial and political considerations that are not associated with
the U.S. market and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking current income, but who can
accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication of the
risks of investing in the Fund by showing changes in the Fund's performance from
year to year and how the Fund's average annual returns since its inception on
September 6, 1985 compare with those of a broad measure of market performance.
The Fund's past performance is not an indication of how the Fund will perform in
the future.
Since Advisor Class shares have been outstanding for less than one year, the
information presented below relates to the Fund's Class A shares, exclusive of
any applicable sales charges. The performance for Advisor Class shares would
have been substantially similar to that of Class A shares, because all Fund
shares are invested in the same portfolio of securities. Any differences in the
returns for the Fund's Class A and Advisor Class shares would result from
variations in their respective expense structures.
<TABLE>
<CAPTION>
TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
<S> <C>
'89' 15.11
'90' 4.26
'91' 14.45
'92' 8.16
'93' 15.45
'94' -4.1
'95' 17.41
'96' 8.06
'97' 11.87
'98' 0.00
</TABLE>
Best quarter Q2 '89: 9.58%
Worst quarter Q1 '90: (4.52%)
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1998
---------------------------------------------------------------------------------------------------------------
MORNINGSTAR
---------------------------------------
CORPORATE MULTI-
BOND SECTOR LONG-TERM
GENERAL BOND BOND
CLASS A UNIVERSE UNIVERSE UNIVERSE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................................... 0.00% 6.83% 1.20% 6.53%
Past 5 years................................................ 6.36% 6.29% 5.81% 6.98%
Past 10 years............................................... 8.85% 8.67% 8.45% 9.42%
</TABLE>
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)..................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price).............. none
Maximum sales charge (load) imposed on
reinvested dividends....................... none
Redemption fee*............................ none
Exchange fee............................... none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
<S> <C>
Management fees*......................... 0.75%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 0.36%
Total annual Fund operating expenses..... 1.11%
</TABLE>
*Management Fees are reduced to 0.50% for net assets over $100
million.
- -------------------------------------------------------------------------
- -- EXAMPLE
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be as follows:
<TABLE>
<CAPTION>
- ----------------
YEAR
- ----------------
<S> <C>
1st $ 113
3rd 353
5th 612
10th 1,352
</TABLE>
3
<PAGE> 212
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
STRATEGIC
BOND FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks total return and, consistent with that objective, to maximize
current income.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in a managed portfolio of foreign
bonds.
The Fund may also invest in U.S. bonds. The types of debt securities the Fund
may hold include corporate, government, and mortgage or asset backed securities.
At least 65% of the value of the Fund's portfolio is expected to be rated in the
four highest rating categories used by Moody's and S&P.
Among the other securities and investment techniques that the Fund's manager
considers important in achieving the Fund's investment objective (or in
controlling the Fund's exposure to risk) are:
- - low rated debt securities (commonly referred to as "high yield" or "junk"
bonds); and
- - derivative investment techniques (such as options, futures, interest rate and
credit swaps, and foreign currency exchange transactions).
The Fund's manager invests in bonds and bond markets that are believed to be
undervalued relative to other issuers or markets. In selecting bonds for the
Fund's portfolio, the manager will consider yields, credit quality and the
fundamental outlook for currency and interest rate trends in different parts of
the world, and may also take into account the ability to hedge currency and
local bond price risk.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
INTEREST RATE RISK: The Fund's debt security investments are susceptible to
decline in a rising interest rate environment even where "management risk" is
not a factor, so you could lose money if you redeem your Fund shares at a time
when interest rates are rising.
CREDIT RISK: The market value of debt securities also tends to vary according to
the relative financial condition of the issuer. Many of the Fund's debt security
holdings may be considered below investment grade (commonly referred to as "high
yield" or "junk" bonds). Low-rated debt securities are considered speculative
and could significantly weaken the Fund's returns if the issuer defaults on its
payment obligations.
NON-DIVERSIFICATION RISK: The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, and may therefore invest a greater percentage of
its assets in a particular issuer than a "diversified" fund. As a result, the
Fund may also be more susceptible than a diversified fund to the price movements
of certain securities it holds in its portfolio.
FOREIGN SECURITY AND EMERGING-MARKET RISK: Investing in foreign securities
involves a number of economic, financial and political considerations that are
not associated with the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing conditions at any given time.
Among these potential risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
4
<PAGE> 213
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DERIVATIVES RISK: The Fund may, but is not required to, use a range of
derivative investment techniques to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements) or to enhance potential gain. The use of
these derivative investment techniques involves a number of risks,
including the possibility of default by the counterparty to the transaction
and, to the extent the judgment of the Fund's manager as to certain market
movements is incorrect, the risk of losses that are greater than if the
derivative technique(s) had not been used.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking a mix of total return and
current income, but who can accept potentially dramatic fluctuations in
capital value in the short term.
*You should consult with your financial advisor before deciding whether the
Fund is an appropriate investment choice in light of your particular
financial needs and risk tolerance.
-- PERFORMANCE INFORMATION
The Fund commenced operations on May 3, 1999, therefore, no performance
information is available.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER fees paid directly from
FEES your investment
- ------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price).................................. none
Maximum deferred sales charge (load) (as
a percentage of purchase price)......... none
Maximum sales charge (load) imposed on
reinvested dividends.................... none
Redemption fee*......................... none
Exchange fee............................ none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ---------------------------------------------------------------------
<S> <C>
Management fees.......................... 0.75%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 0.50%
Total annual Fund operating expenses*.... 1.25%
</TABLE>
*The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.25% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of
the following nine years, the Investment Manager will ensure that
these expenses do not exceed 1.75% of the Fund's average net
assets.
------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- -----------------
YEAR
- -----------------
<S> <C>
1st $127
3rd 502
</TABLE>
5
<PAGE> 214
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
IVY BOND FUND: The Fund seeks to achieve its investment objective of a high
level of current income by investing primarily in investment grade corporate
bonds (which are rated Baa or higher by Moody's or BBB or higher by S&P) and
U.S. Government securities that mature in more than 13 months. The Fund may
invest up to 35% of its net assets in low-rated debt securities (commonly
referred to as "high yield" or "junk" bonds). As much as 20% of the Fund's
portfolio may be invested in foreign securities.
The Fund's manager targets for investment issuers with stable or improving
credit profiles. Individual securities are selected on the basis of factors such
as comparative yields and credit quality, and where appropriate,
country-specific currency and interest rate trends.
IVY INTERNATIONAL STRATEGIC BOND FUND: The Fund seeks to achieve its primary
investment objective of total return, and secondarily current income, by
investing in the debt securities of issuers in any nation. The Fund's portfolio
is actively managed to limit its exposure to individual country, sector,
interest rate and currency risks. The Fund may, however, invest more than 5% of
a portion of its assets in a single issuer (see "Non-diversification risk" on
page 4). Individual securities are selected based on factors such as yields,
credit quality, and the fundamental outlook for country-specific currency and
interest rate trends.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption.
OTHER RISKS: The following table identifies the investment techniques that each
Fund's manager considers important in achieving the Fund's investment objective
or in managing its exposure to risk (and that could therefore have a significant
effect on a Fund's returns). Following the table is a description of the general
risk characteristics of these investment techniques. Other investment methods
that the Funds may use (such as derivative investments), but that are not likely
to play a key role in their overall investment strategies, are described in the
Funds' Statement of Additional Information (see back cover page for information
on how you can receive a free copy).
<TABLE>
<CAPTION>
- -------------------------------------------------------------
IVY INTERNATIONAL
IVY BOND STRATEGIC
INVESTMENT TECHNIQUE FUND BOND FUND
- -------------------------------------------------------------
<S> <C> <C>
Debt securities............... X X
Low-rated debt securities..... X X
Sovereign debt................ X
Zero coupon bonds............. X
Foreign securities............ X
Emerging markets.............. X X
Foreign currencies............ X
Derivatives................... X
Illiquid securities........... X X
Borrowing..................... X X
Temporary defensive
positions..................... X X
</TABLE>
6
<PAGE> 215
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RISK CHARACTERISTICS:
- - DEBT SECURITIES, IN GENERAL: Investing in debt securities involves both
interest rate and credit risk. The value of debt instruments generally
increase as interest rates decline. Conversely, rising interest rates tend to
cause the value of debt securities to decrease. The Fund's portfolio is
therefore susceptible to losses in a rising interest rate environment. The
market value of debt securities also tends to vary according to the relative
financial condition of the issuer. Bonds with longer maturities also tend to
be more volatile than bonds with shorter maturities.
- - LOW-RATED DEBT SECURITIES: In general, low-rated debt securities (commonly
referred to as "high yield" or "junk" 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.
For this reason, these bonds are considered speculative and could
significantly weaken the Funds' returns.
- - SOVEREIGN DEBT SECURITIES: Sovereign debt is issued by foreign governments.
For a variety of reasons (such as cash flow problems, limited foreign
reserves, and political constraints), the governmental entity that controls
the repayment of sovereign debt may not be able or willing to repay the
principal or interest when due. A governmental entity's ability to honor its
debt obligations to the investing Fund may also be contingent on its receipt
from others (such as the International Monetary Fund and more solvent foreign
governments) of specific disbursements, which may in turn be conditioned on
the perceived health of the governmental entity's economy and/or its
implementation of economic reforms. If any of these conditions fail, the Fund
could lose the entire value of its investment for an indefinite period of
time.
- - 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). Because the income from zero coupon
bonds is recognized currently for Federal income tax purposes, the amount of
the unpaid, accrued interest a fund generally would be required to distribute
as dividends includes that income (even though the fund has not actually
received any income proceeds). The fund could be forced to sell other
portfolio securities at a disadvantageous time and/or price in order to meet
its distribution obligations.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect a Fund's performance favorably or
unfavorably, depending upon prevailing conditions at any given time. For
example, the securities markets of many foreign countries may be smaller, less
liquid and subject to greater price volatility than those in the U.S. Foreign
investing may also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets.
Other factors that can affect the value of a Fund's foreign investments include
the comparatively weak supervision and regulation by some foreign governments of
securities exchanges, brokers and issuers, and the fact that many foreign
companies may not be subject to uniform accounting, auditing and financial
reporting standards. It may also be difficult to obtain reliable information
about the securities and business operations of certain foreign issuers.
Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause a Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - FOREIGN CURRENCIES: Many of the securities that Ivy International Strategic
Bond Fund buys are denominated in foreign currencies and the value of the
Fund's investments, as measured in U.S. dollars, may be affected unfavorably
by changes in foreign currency exchange rates and exchange control
regulations. Currency conversions can also be costly.
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with new or developing econo-
7
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FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
mies. Among these additional risks are the following:
- - securities that are even less liquid and more volatile than those in more
developed foreign countries;
- - less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- - increased settlement delays;
- - unusually high inflation rates (which in extreme cases can cause the value of
a country's assets to erode sharply);
- - unusually large currency fluctuations and currency conversion costs; and
- - high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - DERIVATIVE INVESTMENT TECHNIQUES: Ivy International Strategic Bond Fund may,
but is not required to, use certain derivative investment techniques to hedge
various market risks (such as interest rates, currency exchange rates and
broad or specific market movements) or to enhance potential gain. Among the
derivative techniques the Fund might use are options, futures, forward foreign
currency contracts and foreign currency exchange transactions.
Using put and call options could cause the Fund to lose money by forcing the
sale or purchase of portfolio securities at inopportune times or for prices
higher (in the case of put options) or lower (in the case of call options) than
current market values, by limiting the amount of appreciation the Fund can
realize on its investments, or by causing the Fund to hold a security it might
otherwise sell.
Futures transactions (and related options) involve other types of risks. For
example, the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of the Fund
could cause losses on the hedging instrument that are greater than gains in the
value of the Fund's position. In addition, futures and options markets may not
be liquid in all circumstances and certain over-the-counter options may have no
markets. As a result, the Fund might not be able to close out a transaction
before expiration without incurring substantial losses (and it is possible that
the transaction cannot even be closed). In addition, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium.
Foreign currency transactions (such as forward foreign currency contracts) can
cause investment losses in a variety of ways. For example, changes in currency
exchange rates may result in poorer overall performance for the Fund than if it
had not engaged in such transactions. There may also be an imperfect correlation
between the Fund's portfolio holdings of securities denominated in a particular
currency and the forward contracts entered into by the Fund. An imperfect
correlation of this type may prevent the Fund from achieving the intended hedge
or expose the Fund to the risk of currency exchange loss.
- - ILLIQUID SECURITIES: "Illiquid securities" are assets that may not be disposed
of in the ordinary course of business within seven days at roughly the value
at which the investing fund has valued the assets. These may be "restricted
securities," which cannot be sold to the public without registration under the
Securities Act of 1933 (in the absence of an exemption) or because of other
legal or contractual restrictions on resale. Thus, while illiquid securities
may offer the potential for higher returns than more readily marketable
securities, there is a risk that the investing fund will not be able to
dispose of them promptly at an acceptable price.
- - BORROWING: For temporary or emergency purposes, each Fund may borrow up to a
specific percentage of its total assets from qualified banks (10% in the case
of Ivy Bond Fund and 20% in the case of Ivy International Strategic Bond
Fund). Borrowing may exaggerate the effect on a Fund's share value or any
increase or decrease in the value of the securities it holds. Money borrowed
will also be subject to interest costs.
- - TEMPORARY DEFENSIVE POSITIONS: Each Fund may occasionally take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial
8
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- --------------------------------------------------------------------------------
paper, short-term notes and other money market securities. When a Fund assumes
such a defensive position it may not achieve its investment objective.
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: The Funds may have investments in Europe. On January 1,
1999, a new European currency called the "euro" was introduced and adopted for
use by eleven European countries. The transition to daily usage of the euro will
occur during the period from January 1, 1999 through December 31, 2001, at which
time euro bills and coins will be put into circulation. Certain European Union
members, including the United Kingdom, did not officially implement the euro on
January 1, 1999 and may cause market disruptions when and if they decide to do
so. Should this occur, the Funds could experience investment losses.
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Funds' 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
The Funds' managers 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 significant problems will not occur (which either directly or indirectly
may cause a Fund to lose money).
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other seventeen series of Ivy
Fund. For Ivy Bond Fund's fiscal year ending December 31, 1998, the Fund paid
IMI a fee that was equal to 0.66% of the Fund's average net assets. Ivy
International Strategic Bond Fund will pay IMI a fee equal to 0.75% of the
Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY BOND FUND: The Fund is managed by IMI's Fixed Income Team. Among the
research sources and techniques that team members use during the investment
decision-making process are:
- - issuer financial statements;
- - discussions with company managers and Wall Street analysts;
- - credit rating agency opinions; and
- - various financial publications.
IVY INTERNATIONAL STRATEGIC BOND FUND: Richard A. Gluck, Vice President of IMI,
is the Fund's portfolio manager. Before joining IMI, Mr. Gluck was a Vice
President and portfolio manager at Oppenheimer Capital. He has been managing
global fixed income funds since 1989. Mr. Gluck holds a Masters Degree in
management with a concentration in finance from the M.I.T. Sloan School of
Management.
Mr. Gluck is supported by the members of IMI's Fixed Income Team, which is
responsible for providing information on regional and country-specific economic
and political developments and monitoring individual companies. Team members use
a variety of research sources that include:
- - brokerage reports;
- - economic and financial news services;
- - company reports; and
9
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FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- - information from third party research firms (ranging from large investment
banks with global coverage to local research houses).
In many cases, particularly in emerging market countries, IMI's research
analysts also conduct primary research by:
- - meeting with company management;
- - touring facilities; and
- - speaking with local research professionals.
SHAREHOLDER
INFORMATION
- -- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, however, there may be some
period of time during which a Fund's share price and/or performance information
is not available.
Ivy International Strategic Bond Fund normally invests in securities that are
listed on foreign exchanges that may trade on weekends or other days when the
Fund does not price its shares. Therefore, the Fund's share value may change on
days when shareholders will not be able to purchase or redeem shares.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on
the Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer.
- -- HOW TO BUY SHARES
Please read these sections carefully before investing.
Advisor Class shares are offered through this Prospectus only to the following
investors:
- - trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- - 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 his
advice and other services an annual fee of at least 0.50% 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 0.50%
on the assets in the account;
- - officers and Trustees of Ivy Fund (and their relatives);
- - directors and employees of Mackenzie Investment Management Inc. or its
affiliates;
- - 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.)
The following investment minimums, sales charges and expenses apply.
10
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------
Minimum initial investment*............. $10,000
Minimum subsequent investment*.......... $250
Initial sales charge.................... None
CDSC.................................... None
Service and distribution fees........... None
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check that you wish to purchase Advisor Class
shares (see minimum initial investments above.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required. When you redeem, IMSC will normally send redemption proceeds to
you on the next business day, but may take up to seven days (or longer in the
case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
11
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FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - 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, unless you instruct otherwise.
- - A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important Exchange Information" below).
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 12 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or
a capital loss for tax purposes.
- - It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain Funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will mailed to the address of record unless otherwise
instructed.
12
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends monthly. The Funds will distribute net realized
capital gains, if any, at least once a year. The Funds 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 Internal Revenue Code of 1986, as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you 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 a 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 you as long-term capital gains, regardless of how long
you have held your shares. Dividends are taxable to you in the same manner
whether received in cash or reinvested in additional Fund shares.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by a Fund during January of the
following calendar year. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by your
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Funds
under applicable state or local law.
13
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FINANCIAL HIGHLIGHTS
The "Financial highlights" table is intended to help you understand the Ivy
Bond Fund's financial performance and reflects results for a single Fund
share. Ivy International Strategic Bond Fund commenced operations on May 3,
1999, and accordingly, no financial information is presented for that Fund.
The total returns in the table represent the rate an investor would have
earned (or lost) each year on an investment in Ivy Bond Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is included in its Annual Report to shareholders
(which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY BOND FUND ADVISOR CLASS
-------------------------
For the period
January 20, 1998
(Commencement)
to December 31,
- ------------------------------------------------------------------------------------------
1998
SELECTED PER SHARE DATA -------------------------
<S> <C>
Net asset value, beginning of period....................... $10.28
-------------------------
Loss from investment operations
Net investment income.................................... .69
Net gains or losses on securities (both realized
and unrealized)........................................ (.72)
-------------------------
Total from investment operations......................... (.03)
-------------------------
Less distributions
Dividends
From net investment income............................. .69
In excess of net investment income..................... .02
-------------------------
Total distributions.................................... .71
-------------------------
Net asset value, end of period............................. $ 9.54
=========================
Total return (%)(a)........................................ (.30)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 347
Ratio of expenses to average net assets (%)(b)............. 1.11
Ratio of net investment income to average net assets
(%)(b)................................................... 7.16
Portfolio turnover rate (%)................................ 43
(a) Total return repre-
sents aggregate total
return and does not
reflect a sales charge.
(b) Annualized
</TABLE>
14
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NOTES
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15
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NOTES
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16
<PAGE> 225
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
USE FOR ADVISOR
CLASS ONLY
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address__________________________________________________________________
City _________________________________________ State _______ Zip ________
Phone # (day) (___)_________________ Phone # (evening) (__)_____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence ______________
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): __________________
Social security # _____-____-_______ or Tax identification _____________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _________
Representative's name ___________________________________________________
Representative's # _________________ Representative's phone _____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for $__________ made payable to
the appropriate fund. Please invest it in Advisor Class Shares of the
following fund(s):
$ ______________ Ivy Bond Fund $ _______________ Ivy International
Strategic Bond Fund
B. FOR DEALER USE ONLY
Confirmed trade orders: ______________ ________________ ___________
Confirm Number Number of Shares Trade Date
<PAGE> 226
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 account.
Fund name: ________________________________________________________
Account #: ________________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares in this account or a different Ivy fund
account.
Fund name: ________________________________________________________
Account #: ________________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $____ for each time period indicated below and invest my
bank proceeds in Advisor Class shares of the following Ivy fund:
Fund name: __________________________________________________________
Account #: __________________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
___________________).
___ Semiannually (on the ___ day of the months of
_______ and _______).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($250 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ________________________________________________________
Account #: ________________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___ Semiannually (on the _____ day of the months of
___________ and __________).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional Advisor Class shares of a
different Ivy Fund:
Fund name: ________________________________________________________
Account #: ________________________________________________________
Note: A minimum balance of $10,000 is required to establish a SWP.
6 OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _______________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City _____________________________ State _________________ Zip ___________
B. FED WIRE/EFT INFORMATION
Financial institution ____________________________________________________
ABA # ____________________________________________________________________
Account # ________________________________________________________________
Street ___________________________________________________________________
City _____________________________ State _________________ Zip ___________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
________________________________________ _______________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 227
* Symbol not assigned as of this printing
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Bond Fund Advisor Class * 465897296
Ivy International Strategic Bond Fund
Advisor Class * 465898500
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 228
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
3, 1999, which is incorporated by reference into this Prospectus, and
each Fund's annual and semiannual reports to shareholders. Each Fund's
annual report includes a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during its most recent fiscal year. The SAI and annual and
semiannual reports are available upon request and without charge from
the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and annual and
semiannual reports) may also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. (please call 1-800-SEC-0330 for
further details). Information about the Funds is also available on the
SEC's Internet Website (www.sec.gov), and copies of this information
may be obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
01FXINADV0499
<PAGE> 229
[Ivy Funds Logo]
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 3, 1999 IVY INTERNATIONAL FUND
Ivy Fund is a registered open-end investment company
consisting of nineteen separate portfolios. This
Prospectus relates to the Class A, Class B, Class C and
Class I shares of Ivy International Fund (the "Fund").
On April 18, 1997, the Fund suspended
the offer of its shares to new
investors.
The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy
or accuracy of this Prospectus. Any
representation to the contrary is a
criminal offense.
Investments in the Fund are not deposits
of any bank and are not federally
insured or guaranteed by the Federal
Deposit Insurance Corporation or any
other government agency.
- -- CONTENTS
2 Ivy International Fund
4 Additional information
about investment strategies
and risks
6 Management
7 Shareholder information
14 Financial highlights
17 Account application
Ivy Mackenzie Logo
<TABLE>
<S> <C> <C>
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[Mackenzie Logo]
<PAGE> 230
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
IVY
INTERNATIONAL
FUND
- -- INVESTMENT OBJECTIVE
The Fund's principal investment objective is long-term capital growth.
Consideration of current income is secondary to this principal objective.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its total assets in equity securities
principally traded in European, Pacific Basin and Latin American markets.
To enhance potential return, the Fund may invest in countries with new or
developing economies.
The Fund's manager uses a low turnover, value approach in selecting the Fund's
investments.
- -- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Common stocks represent a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a company's
success or failure. The market value of common stock can fluctuate significantly
even where "management risk" is not a factor, so you could lose money if you
redeem your Fund shares at a time when the Fund's stock portfolio is not
performing as well as expected.
FOREIGN SECURITY RISK: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance unfavorably,
depending upon prevailing conditions at any given time. Among these potential
risks are:
- - greater price volatility;
- - comparatively weak supervision and regulation of securities exchanges, brokers
and issuers;
- - higher brokerage costs;
- - fluctuations in foreign currency exchange rates and related conversion costs;
- - adverse tax consequences; and
- - settlement delays.
The risks of investing in foreign securities are more acute in countries with
new or developing economies.
- -- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
2
<PAGE> 231
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table provides some indication
of the risks of investing in the Fund by showing changes in the Fund's
performance from year to year and how the Fund's average annual returns
since it was first offered for sale to the public on April 30, 1986 compare
with those of a broad measure of market performance. The Fund's past
performance is not an indication of how the Fund will perform in the
future.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31(**)
-----------------------------------------------------------
(CHART)
CLASS A SHARES
--------------
<S> <C>
'89' 28.26
'90' -12.97
'91' 16.93
'92' 0.07
'93' 48.37
'94' 3.92
'95' 12.65
'96' 19.72
'97' 10.38
'98' 7.34
</TABLE>
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other three classes of shares during these periods were different
from those of Class A because of variations in their respective expense
structures.
**Northern Cross Investments Limited has served as the Fund's investment
advisor since April 1, 1993. Before that, the Fund had the following
advisors: Boston Overseas Investors, Inc. (July 1, 1990 - March 31, 1993)
and Marsh & Cunningham (November 15, 1985 - June 30, 1990).
Best quarter Q1 '87: 24.22%
Worst quarter Q4 '87: (22.74%)
<TABLE>
<CAPTION>
for the periods ending
AVERAGE ANNUAL TOTAL RETURNS(#) December 31
------------------------------------------------------------------------------------------
MORNINGSTAR LIPPER
MSCI FOREIGN INTL
EAFE STOCK EQUITY
CLASS A CLASS B CLASS C CLASS I INDEX UNIVERSE CATEGORY
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Past year........ 1.17% 1.43% 5.46% 7.75% 20.00% 12.26% 13.02%
Past 5 years..... 9.37% 9.51% n/a 10.81% 9.19% 7.44% 7.87%
Past 10 years.... 11.73% n/a n/a n/a 5.54% 8.54% 9.29%
Since inception:
Class B*......... n/a 10.82% n/a n/a 8.39% 8.23% 8.88%
Class C**........ n/a n/a 10.30% n/a 7.84% 7.92% 8.51%
Class I***....... n/a n/a n/a 11.77% 8.74% 7.99% 8.76%
</TABLE>
(#)Performance figures reflect any applicable sales charges.
* The inception date for the Fund's Class B shares is October 23, 1993.
MSCI Index performance calculated from October 31, 1993. Morningstar
performance calculated from November 1, 1993. Lipper performance
calculated from October 28, 1993.
** The inception date for the Fund's Class C shares is April 30, 1996.
*** The inception date for the Fund's Class I shares is October 6, 1994.
MSCI Index performance calculated from September 30, 1994. Morningstar
performance calculated from October 1, 1994.
- -- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- --------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering
price)..................... 5.75% none none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)..................... none 5.00% 1.00% none
Maximum sales charge (load)
imposed on reinvested
dividends.................. none none none none
Redemption fee*............ none none none none
Exchange fee............... none none none none
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees*......... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees..... 0.25% 1.00% 1.00% none
Other expenses........... 0.33% 0.41% 0.40% 0.18%
Total annual Fund
operating expenses....... 1.58% 2.41% 2.40% 1.18%
</TABLE>
*Management Fees are reduced to 0.90% for net assets over $2.5
billion.
- --------------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 726 $ 744 $ 244 $ 343 $ 243 $ 120
3rd 1,045 1,051 751 748 748 375
5th 1,386 1,485 1,285 1,280 1,280 649
10th 2,345 2,541 2,541 2,736 2,736 1,432
</TABLE>
3
<PAGE> 232
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT INVESTMENT
STRATEGIES AND RISKS
- -- PRINCIPAL STRATEGIES
The Fund seeks to achieve its principal objective of long-term capital growth by
investing primarily in equity securities principally traded in European, Pacific
Basin and Latin American markets. The Fund invests in a variety of economic
sectors and industry segments in order to reduce the effects of price volatility
in any one area, and usually is invested in at least three different countries.
The Fund's manager focuses on rapidly expanding foreign economies and companies
that generally have at least $1 billion in capitalization at the time of
investment and a solid history of operations. Individual securities are selected
on the basis of value indicators (such as earnings, cash flow, assets and
long-term growth potential) and are reviewed for fundamental financial strength.
- -- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of the Fund's investments and the income
they generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
The Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in the Fund
depending upon the timing of your initial purchase and any subsequent
redemption.
OTHER RISKS: Since the Fund invests heavily in the equity securities of foreign
issuers, it is more susceptible to the risks associated with these types of
securities than a fund that invests primarily in the securities of U.S. issuers
and/or debt securities. Following is a description of these risks, along with
the risks commonly associated with the other securities and investment
techniques that the Fund's portfolio manager considers important in achieving
the Fund's investment objective or in managing the Fund's exposure to risk (and
that could therefore have a significant effect on the Fund's returns). Other
investment methods that the Fund may use (such as derivative investments), but
that do not play a key role in the Fund's overall investment strategy, are
described in the Fund's Statement of Additional Information (see back cover page
for information on how you can receive a free copy).
- - COMMON STOCKS: Common stock represents a proportionate ownership interest in a
company. As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller-company stocks may also be higher than
those of larger companies.
- - DEPOSITORY RECEIPTS: The Fund may acquire interests in foreign issuers in the
form of sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs") and similar types of depository receipts. ADRs
typically are issued by a U.S. bank or trust company and represent ownership
of the underlying securities issued by a foreign corporation. GDRs and other
types of depository receipts are usually issued by foreign banks or trust
companies. The Fund's investments in ADRs, GDRs and other depository receipts
are viewed as investments in the underlying securities.
Depository receipts can be difficult to price and are not always
exchange-listed. Unsponsored depository programs also are organized
independently 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.
- - FOREIGN SECURITIES: Investing in foreign securities involves a number of
economic, financial and political considerations that are not associated with
the U.S. markets and that could affect the Fund's performance favorably or
unfavorably,
4
<PAGE> 233
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
depending upon prevailing conditions at any given time. For example, the
securities markets of many foreign countries may be smaller, less liquid and
subject to greater price volatility than those in the U.S. Foreign investing
may also involve brokerage costs and tax considerations that are not usually
present in the U.S. markets.
Other factors that can affect the value of the Fund's foreign investments
include the comparatively weak supervision and regulation by some foreign
governments of securities exchanges, brokers and issuers, and the fact that many
foreign companies may not be subject to uniform accounting, auditing and
financial reporting standards. It may also be difficult to obtain reliable
information about the securities and business operations of certain foreign
issuers. Settlement of portfolio transactions may also be delayed due to local
restrictions or communication problems, which can cause the Fund to miss
attractive investment opportunities or impair its ability to dispose of
securities in a timely fashion (resulting in a loss if the value of the
securities subsequently declines).
- - SPECIAL EMERGING-MARKET CONCERNS: The risks of investing in foreign securities
are heightened in countries with developing economies. Among these additional
risks are the following:
- securities that are even less liquid and more volatile than those in more
developed foreign countries;
- less stable governments that are susceptible to sudden adverse actions (such
as nationalization of businesses, restrictions on foreign ownership or
prohibitions against repatriation of assets);
- increased settlement delays;
- abrupt changes in exchange rate regime or monetary policy;
- unusually large currency fluctuations and currency conversion costs (see
"Foreign Currencies" below); and
- high national debt levels (which may impede an issuer's payment of principal
and/or interest on external debt).
- - FOREIGN CURRENCIES: Many of the Fund's securities are denominated in foreign
currencies and the value of the Fund's investments as measured in U.S. dollars
may be affected unfavorably by changes in foreign currency exchange rates and
exchange control regulations. Currency conversion can also be costly.
- - FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND FORWARD FOREIGN CURRENCY CONTRACTS:
The Fund may, but is not required to, use foreign currency exchange
transactions and forward foreign currency contracts to hedge certain market
risks (such as interest rates, currency exchange rates and broad or specific
market movement). These investment techniques involve a number of risks,
including the possibility of default by the counterparty to the transaction
and, to the extent the Fund's judgment as to certain market movements is
incorrect, the risk of losses that are greater than if the investment
technique had not been used. For example, there may be an imperfect
correlation between the Fund's portfolio holdings of securities denominated in
a particular currency and the forward contracts entered into by the Fund. An
imperfect correlation of this type may prevent the Fund from achieving the
intended hedge or expose the Fund to the risk of currency exchange loss. In
addition, although the use of these investment techniques for hedging purposes
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, they also tend to limit any potential gain that might result
from an increase in the position's value.
- - ILLIQUID SECURITIES: The Fund may invest up to 15% of its net assets in
"illiquid securities," which are assets that may not be disposed of in the
ordinary course of business within seven days at roughly the value at which
the Fund has valued the assets. Some of these may be "restricted securities,"
which cannot be sold to the public without registration under the Securities
Act of 1933 (in the absence of an exemption) or because of other legal or
contractual restrictions on resale. Thus, while illiquid securities may offer
the potential for higher returns than more readily marketable securities,
there is a risk that the Fund will not be able to dispose of them promptly at
an acceptable price.
- - WARRANTS: As a holder of certain securities, the Fund may have the opportunity
to purchase warrants. The holder of a warrant pays for the right to purchase a
given number of an issuer's shares at a specified price until the warrant
expires. If a warrant is not exercised by the date
5
<PAGE> 234
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
of its expiration (such as when the underlying securities are no longer an
attractive investment), the Fund would lose what it paid for the warrant.
- - TEMPORARY DEFENSIVE POSITIONS: The Fund may from time to time take a temporary
defensive position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities. When the
Fund assumes such a defensive position it may not achieve its investment
objective. Investing in debt securities also involves both interest rate and
credit risk. Generally, the value of debt instruments rises and falls
inversely with fluctuations in interest rates. Thus, 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. The market value
of debt securities also tends to vary according to the relative financial
condition of the issuer. Bonds with longer maturities tend to be more volatile
than bonds with shorter maturities.
- - BORROWING: For temporary or emergency purposes (such as meeting shareholder
redemption requests within the time periods specified under the Investment
Company Act of 1940), the Fund may borrow up to 10% of the value of its total
assets from qualified banks. Borrowing may exaggerate the effect on the Fund's
share value of any increase or decrease in the value of the securities it
holds. Money borrowed will also be subject to interest costs.
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: On January 1, 1999, a new European currency called the
"euro" was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from January
1, 1999 through December 31, 2001, at which time euro bills and coins will be
put into circulation. Certain European Union members, including the United
Kingdom, did not officially implement the euro on January 1, 1999 and may cause
market disruptions when and if they decide to do so. Should this occur, the Fund
could experience investment losses.
YEAR 2000 RISKS: 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 inability of computer-
based systems to make this distinction could have a seriously adverse effect on
the handling of securities trades, pricing and account services worldwide. The
Fund's 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. Information about the year 2000 readiness of the issuers of the
securities that the Funds may purchase is also taken into consideration during
the investment decision-making process (though such information may not be
readily available, particularly in non-U.S. countries, and may be limited to
public filings or statements from company representatives that are not
independently verifiable).
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
significant problems will not occur (which either directly or indirectly may
cause the Fund to lose money).
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Fund.
IMI is an SEC-registered investment advisor with over $5 billion in assets under
management, and provides similar services to the other eighteen series of the
Trust. For the Fund's fiscal year ending December 31, 1998, the Fund paid to IMI
a fee equal to 1.00% of the Fund's average net assets.
Northern Cross Investments Limited ("Northern Cross"), an SEC-registered
investment advisor located at 48 Par-La-Ville Road, Hamilton, HM 11 Bermuda,
serves as subadvisor to the Fund under an Agreement with IMI. Northern Cross
began operations in 1993, and as of the end of 1998 had over $10 billion in
assets under management. For its services, Northern Cross receives a fee from
IMI that is equal, on an annual basis, to .60% of the first $1.5 billion in
average net assets, .55% of the
6
<PAGE> 235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
next $1 billion in average net assets and .50% of the Fund's average net assets
over $2.5 billion.
- -- PORTFOLIO MANAGER
Hakan Castegren, President of Northern Cross, has managed the Fund since 1986.
Mr. Castegren has more than 40 years of professional investment experience and
holds an MBA from the Stockholm School of Economics.
SHAREHOLDER INFORMATION
- -- PRICING OF FUND SHARES
The Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last sale price on the exchange on which it was
purchased.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Fund's Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which
the Fund prices its shares. Fair-value pricing under these circumstances is
designed to protect existing shareholders from the actions of short-term
investors trading into and out of the Fund in an attempt to profit from
short-term market movements. When such fair-value pricing occurs, however, there
may be some period of time during which the Fund's share price and/or
performance information is not available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on
the Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge (see "Choosing the
appropriate class of shares" below). Since the Fund normally invests in
securities that are listed on foreign exchanges that may trade on weekends or
other days when the Fund does not price its shares, the Fund's share value may
change on days when shareholders will not be able to purchase or redeem the
Fund's shares.
- -- HOW TO BUY SHARES
Please read these sections carefully before investing.
Effective April 18, 1997, the Fund suspended the offer of its shares to new
investors. Shares of the Fund are available for purchase only by existing
shareholders of the Fund. Once a shareholder's account has been liquidated, the
shareholder may not invest in the Fund at a later date.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
The essential features of the Fund's different classes of shares are described
below. If you do not specify on your Account Application which class of shares
you are purchasing, it will be assumed that you are purchasing Class A shares.
The Fund has adopted separate distribution plans pursuant to Rule 12b-1 under
the 1940 Act for its Class A, B and C shares that allow the Fund to pay
distribution and other fees for the sale and distribution of its shares and for
services provided to shareholders. Because these fees are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
- - CLASS A SHARES: Class A shares are sold at net asset value plus a maximum
sales charge of 5.75% (the "offering price"). The sales charge may be reduced
or eliminated if certain conditions are met (see "Additional purchase
information" on page 8). Class A shares are subject to a 0.25% Rule 12b-1
service fee.
- - CLASS B SHARES: Class B shares are offered at net asset value, without an
initial sales charge,
7
<PAGE> 236
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
but subject to a contingent deferred sales charge ("CDSC") that declines from
5.00% to zero on certain redemptions within six years of purchase. Class B
shares are subject to a 0.75% Rule 12b-1 distribution fee and a 0.25% Rule
12b-1 service fee, and convert automatically into Class A shares eight years
after purchase.
- - CLASS C SHARES: Class C shares are offered at net asset value, without an
initial sales charge, but subject to a CDSC of 1.00% for redemptions within
the first year of purchase. Class C shares are subject to a 0.75% Rule 12b-1
distribution fee and a 0.25% Rule 12b-1 service fee.
- - CLASS I SHARES: Class I shares are offered to certain classes of investors at
net asset value, without any sales load or Rule 12b-1 fees.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000 $5,000,000
Minimum subsequent
investment*.......... $100 $100 $100 $10,000
Initial sales
charge............... Maximum None None None
5.75%,
with
options
for a
reduction
or waiver
CDSC................. None, Maximum 1.00% for None
except on 5.00%, the first
certain declines year
NAV over six
purchases years
Service and
distribution fees.... 0.25% 0.75% 0.75% None
service distribution distribution
fee fee and fee and
0.25% 0.25%
service fee service
fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
- -- ADDITIONAL PURCHASE INFORMATION
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth below
(which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED 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 of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher) of all Ivy Fund Class A shares you
own.
- A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the following
methods:
- through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- under certain qualified retirement plans;
- as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- as an employee of a selected dealer; or
- through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Fund are made available to Plan participants at NAV without a
CDSC if the Plan has less than $3 million in
8
<PAGE> 237
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
assets or fewer than 500 eligible employees. For further information see
"Group Systematic Investment Program" in the SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. Ivy Mackenzie Distributors, Inc. ("IMDI"),
the Fund's distributor, may pay the dealer or agent (out of IMDI's own
resources) for its distribution assistance according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------
PURCHASE AMOUNT COMMISSION
- --------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI) including, for example, those which employ a registered
representative who sells a minimum dollar amount of the shares of the Fund
and/or other funds distributed by IMDI during a specified time period.
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 you redeem your Class C
shares within one year of purchase they will be subject to a CDSC of 1.00%, and
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the following rates:
<TABLE>
<CAPTION>
- ----------------------------------------------------
CDSC AS A PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- ----------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares 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. No charge will be assessed on increases in account value
above the original purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following order:
- - Shares held more than six years;
- - Shares acquired through reinvestment of dividends and distributions;
- - Shares subject to the lowest CDSC percentage, on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation, which is
not subject to a CDSC, redeemed first, then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
- - Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- - Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- - Redemptions resulting from a tax-free return of excess contribution to an IRA.
- - Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- - Withdrawals through the Systematic Withdrawal Plan of up to 12% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for Federal income
tax purposes. Class C shares do not have a similar conversion privilege.
9
<PAGE> 238
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
CLASS I SHARES: Class I shares are offered 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.
- -- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to Ivy International Fund. You
should note on the check the class of shares you wish to purchase (see page 8
for minimum initial investments). Deliver your application materials to your
registered representative or selling broker, or send them to one of the
addresses below:
- - BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, FL 33431-0922
- - BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy.
Boca Raton, FL 33432-6114
- -- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in the Fund:
- - BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail 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 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 Account Registration
Your Fund Number and Account Number
- - BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
- -- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
properly transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your request:
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
on the left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required. When you redeem, IMSC will normally send redemption proceeds to
you on the next business day, but may take up to seven days (or longer in the
case of shares recently purchased by check).
- - BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC 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 or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- - BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
10
<PAGE> 239
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- - BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- - BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- - BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- - A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within six years of purchase, and to Class C shares that are redeemed
within one year of purchase.
- - If you own shares of more than one class of the Fund, the Fund will redeem
first the shares having the highest 12b-1 fees, unless you instruct otherwise.
- - Any shares subject to a CDSC will be redeemed last unless you specifically
elect otherwise.
- - Shares will be redeemed in the order described under "Additional purchase
information--Class B and Class C Shares", above.
- - The Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- - The Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- - The Fund may make payment for redeemed shares in the form of securities of the
Fund taken at current values.
- -- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- - BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 10 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- - BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC 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 or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- - You must exchange into the same share class you currently own.
- -- Exchanges are considered taxable events and may result in a capital gain or a
capital loss for tax purposes.
- - It is the policy of the Fund to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Fund may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Fund generally declares and pays dividends and capital gain distributions
(if any) at least once a year.
- - Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- - Reinvested dividends and distributions are added to your account at NAV and
are not subject to a
11
<PAGE> 240
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
sales charge regardless of which share class you own.
- - Cash dividends and distributions can be sent to you:
- - BY MAIL: a check will be mailed to the address of record unless otherwise
instructed.
- - BY ELECTRONIC FUNDS TRANSFER: your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Fund intends to
declare and pay dividends annually. The Fund will distribute net investment
income and net realized capital gains, if any, at least once a year. The 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 Internal Revenue Code of 1986,
as amended (the "Code").
Dividends paid out of the Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you as
ordinary income. If a portion of the 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 you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares.
If shares of the Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the 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. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by the
Fund.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
The Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes. You should
consult with your tax adviser 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.
12
<PAGE> 241
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
13
<PAGE> 242
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years, and reflects results
for a single Fund share. The total returns in the table represent the rate
an investor would have earned (or lost) each year on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the Fund's
Annual Report to shareholders (which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY INTERNATIONAL FUND --------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 39.03 $ 35.89 $ 30.67 $ 27.60 $ 27.71
--------------------------------------------------------------
Income from investment operations
Net investment income................................... .37 .24 .20 .25 .07
Net gains or losses on securities (both realized and
unrealized)........................................... 2.50 3.47 5.85 3.22 1.01
--------------------------------------------------------------
Total from investment operations........................ 2.87 3.71 6.05 3.47 1.08
--------------------------------------------------------------
Less distributions
Dividends from net investment income.................... .35 .21 .19 .25 .07
Distributions
From capital gains.................................... .22 .26 .64 .12 1.11
In excess of capital gains............................ .13 .10 -- .03 --
Returns of capital...................................... -- -- -- -- .01
--------------------------------------------------------------
Total distributions................................... .70 .57 .83 .40 1.19
--------------------------------------------------------------
Net asset value, end of period............................ $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%).......................................... 7.34(a) 10.38(a) 19.72(a) 12.65(a) 3.92(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $ 1,613,797 $1,705,772 $989,254 $475,989 $229,586
Ratio of expenses to average net assets (%)............... 1.58 1.59 1.65 1.52 1.58
Ratio of net investment income to average net assets
(%)..................................................... .83 .68 .76 .97 .30
Portfolio turnover rate (%)............................... 15 8 14 6 7
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
for the year ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 38.82 $ 35.73 $ 30.67 $ 27.60 $ 27.71
--------------------------------------------------------------
Income from investment operations
Net investment (loss) income............................ -- (.06) (.01) .01 (.10)
Net gains or losses on securities (both realized and
unrealized)........................................... 2.50 3.44 5.76 3.20 .91
--------------------------------------------------------------
Total from investment operations........................ 2.50 3.38 5.75 3.21 .81
--------------------------------------------------------------
Less distributions
Dividends
From net investment income............................ -- -- -- .01 --
In excess of net investment income.................... -- -- .05 -- --
Distributions
From capital gains.................................... .22 .21 .64 .10 .90
In excess of capital gains............................ .13 .08 -- .03 --
Returns of capital...................................... -- -- -- -- .02
--------------------------------------------------------------
Total distributions................................... .35 .29 .69 .14 .92
--------------------------------------------------------------
Net asset value, end of period............................ $ 40.97 $ 38.82 $ 35.73 $ 30.67 $ 27.60
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%).......................................... 6.43(a) 9.46(a) 18.76(a) 11.62(a) 2.96(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $ 542,997 $ 568,521 $312,161 $ 74,650 $ 30,143
Ratio of expenses to average net assets (%)............... 2.41 2.42 2.45 2.44 2.50
Ratio of net investment (loss) income to average net
assets (%).............................................. (.01) (.15) (.04) .05 (.62)
Portfolio turnover rate (%)............................... 15 8 14 6 7
</TABLE>
14
<PAGE> 243
- ------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
for the period
April 30, 1996
for the year ended (Commencement)
December 31, to December 31,
-------------------------------------------
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
$ 38.64 $ 35.58 $ 32.68
-------------------------------------------
-- (.05) --
2.50 3.42 3.74
-------------------------------------------
2.50 3.37 3.74
-------------------------------------------
-- .01 --
-- -- .20
.22 .21 .64
.13 .09 --
-------------------------------------------
.35 .31 .84
-------------------------------------------
$ 40.79 $ 38.64 $ 35.58
-------------------------------------------
-------------------------------------------
6.46(a) 9.50(a) 11.45(b)
$154,378 $174,880 $44,450
2.40 2.41 2.44(c)
.01 (.14) (.03)(c)
15 8 14
</TABLE>
- ----------------------------------------------------------------------
(a) Total
return does
not reflect a
sales charge.
(b) Total
return
represents
aggregate
total return
and does not
reflect a
sales charge.
(c) Annualized
<TABLE>
<CAPTION>
CLASS I
---------------------------------------------------------------
for the period
October 6, 1994
for the year ended (Commencement)
December 31, to December 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 39.06 $ 35.89 $ 30.67 $ 27.60 $ 29.06
---------------------------------------------------------------
.55 .32 .27 .30 .03
2.48 3.56 5.88 3.22 (.49)
---------------------------------------------------------------
3.03 3.88 6.15 3.52 (.46)
---------------------------------------------------------------
.53 .32 .27 .30 .03
-- -- .02 -- --
.22 .28 .64 .12 .92
.13 .11 -- .03 --
-- -- -- -- .05
---------------------------------------------------------------
.88 .71 .93 .45 1.00
---------------------------------------------------------------
$ 41.21 $ 39.06 $ 35.89 $ 30.67 $ 27.60
---------------------------------------------------------------
---------------------------------------------------------------
7.75(a) 10.87(a) 20.06(a) 12.85(a) (1.64)(b)
$156,999 $115,046 $53,344 $13,020 $ 4,921
1.18 1.18 1.25 1.35 1.41(c)
1.23 1.08 1.16 1.14 .47(c)
15 8 14 6 7
</TABLE>
15
<PAGE> 244
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
16
<PAGE> 245
Account
Application
FUND USE ONLY
_______________________
Account Number
_______________________
Dealer/Branch/Rep
_______________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
Ivy Mackenzie Services Corp.,
P.O. Box 3022, Boca Raton, Florida 33431-0922
______________________________________________________________________
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
______________________________________________________________________
1 REGISTRATION
Name _________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Address ______________________________________________________________
City ______________________________ State ______________ Zip ________
Phone # (day) ( ) ( )
__ ___________________ Phone # (evening) _____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other __________
Date of trust ____________________ Minor's state of residence ______
2 TAX I.D.
Citizenship: ___ U.S. ___ Other (please specify): _____________
Social security # ___ -___ -____ or Tax identification # _____-______
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _______
Representative's name ________________________________________________
Representative's # __________________ Representative's phone # _______
Authorized signature of dealer _______________________________________
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum) for $ __________ made payable to
Ivy International Fund. Please invest it in: ___ Class A ___ Class B
____ Class C ____ Class I shares.
B. I qualify for a reduction or elimination of
the 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 the
account(s) listed below.
Fund name:____________________ Fund name:______________________
Account #:____________________ Account #:______________________
If establishing a Letter of Intent, you will need to purchase Class A
shares over a 13-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
C. FOR DEALER USE ONLY
Confirmed trade orders: _______________ ________________ ____________
Confirm Number Number of Shares Trade Date
<PAGE> 246
DISTRIBUTION OPTIONS
5
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 the same class of a different Ivy fund account.
Fund name: ______________________________________________________
Account #: ______________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a
different Ivy fund account.
Fund name: ______________________________________________________
Account #: ______________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy International Fund account listed below.
1. Withdraw $_____ for each time period indicated below and invest my
bank proceeds into the following Ivy International Fund account:
Share class: __ Class A __ Class B __ Class C
Account #: _______________________________________________________.
2. Debit my bank account:
___ Annually (on the ___ day of the month of
___________________).
___ Semiannually (on the ___ day of the months of
______ and ______).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy International Fund account automatically
debited on a predetermined frequency and the proceeds sent to me per
my instructions below.
1. Withdraw ($50 minimum) $_____ for each time period indicated
below from the following Ivy International Fund account:
Share class: __ Class A __ Class B __ Class C
Account #: _____________________________________________________
2. Withdraw from my Ivy International Fund account:
___ Annually (on the _____ day of the month of
______________).
___ Semiannually (on the _____ day of the months of
____ and _____).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional shares of the same class of a
different Ivy fund:
Fund name: ______________________________________________________
Account #: ______________________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
6. OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC 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. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy 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
By checking "yes" immediately above, 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 (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
SPECIAL PAYEE
7
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _____________________________________________
Account # (if applicable) ______________________________________________
Street _________________________________________________________________
City _________________________ State ____________________ Zip _____
B. FED WIRE/EFT INFORMATION
Financial institution __________________________________________________
ABA # __________________________________________________________________
Account # ______________________________________________________________
Street _________________________________________________________________
City ____________________________ State _____________________ Zip _____
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/ Redemption
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 "How to exchange shares" 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 Date
Corporate Officer
__________________________________________________ __________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
<PAGE> 247
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
CLASS SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy International Fund -- Class A IVINX 465903102
Ivy International Fund -- Class B IVIBX 465903201
Ivy International Fund -- Class C IVNCX 465897585
Ivy International Fund -- Class I IVIIX 465897874
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 248
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUND
Additional information about the Fund and its investments is contained
in the Fund's Statement of Additional Information dated May 3, 1999
(the "SAI"), which is incorporated by reference into this Prospectus,
and the Fund's annual and semiannual reports to shareholders. The
Fund's annual report includes a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during its most recent fiscal year. The SAI and annual and
semiannual reports are available upon request and without charge from
the Distributor at the following address and phone number.
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
800.456.5111
Information about the Fund (including the SAI and annual and semiannual
reports) may also be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. (please call 1-800-SEC-0330 for further
details). Information about the Fund is also available on the SEC's
Internet Website (www.sec.gov), and copies of this information may be
obtained, upon payment of a copying fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IIFXX0499
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Fund's transfer agent,
regarding any other
inquiries about the Fund
at 1.800.777.6472.
www.ivymackenzie.com
E-mail:
[email protected]
<PAGE>
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS 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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B, and C shares of Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, and Ivy South America Fund (each a "Fund"). The other
fifteen portfolios of the Trust are described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Funds dated May 3, 1999 (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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
iii
TABLE OF CONTENTS
GENERAL INFORMATION...........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS...................................1
IVY ASIA PACIFIC FUND................................................1
INVESTMENT RESTRICTIONS FOR ASIA PACIFIC FUND........................2
IVY CHINA REGION FUND................................................4
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND....................6
IVY DEVELOPING NATIONS FUND..........................................8
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING NATIONS FUND..............9
IVY SOUTH AMERICA FUND..............................................11
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND..................12
COMMON STOCKS.......................................................14
CONVERTIBLE SECURITIES..............................................14
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES.........................15
THE CHINA REGION....................................................15
SOUTH AMERICAN SECURITIES...........................................16
DEBT SECURITIES.....................................................17
IN GENERAL.................................................17
INVESTMENT-GRADE DEBT SECURITIES...........................18
LOW-RATED DEBT SECURITIES..................................18
U.S. GOVERNMENT SECURITIES.................................19
ZERO COUPON BONDS..........................................20
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES....20
ILLIQUID SECURITIES.................................................21
FOREIGN SECURITIES..................................................21
DEPOSITORY RECEIPTS.................................................22
EMERGING MARKETS....................................................22
FOREIGN CURRENCIES..................................................24
FOREIGN CURRENCY EXCHANGE TRANSACTIONS..............................24
OTHER INVESTMENT COMPANIES..........................................25
REPURCHASE AGREEMENTS...............................................25
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS...................26
COMMERCIAL PAPER....................................................26
BORROWING...........................................................26
WARRANTS............................................................26
OPTIONS TRANSACTIONS................................................26
IN GENERAL.................................................27
WRITING OPTIONS ON INDIVIDUAL SECURITIES...................28
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES................28
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES.......29
RISKS OF OPTIONS TRANSACTIONS..............................29
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..................30
IN GENERAL.................................................30
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS.....31
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS..........32
SECURITIES INDEX FUTURES CONTRACTS..................................33
RISKS OF SECURITIES INDEX FUTURES..........................34
COMBINED TRANSACTIONS......................................35
PORTFOLIO TURNOVER...........................................................35
TRUSTEES AND OFFICERS........................................................35
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI...................35
INVESTMENT ADVISORY AND OTHER SERVICES.......................................36
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES................36
DISTRIBUTION SERVICES...............................................37
RULE 18F-3 PLAN............................................39
RULE 12B-1 DISTRIBUTION PLANS..............................39
CUSTODIAN...........................................................42
FUND ACCOUNTING SERVICES............................................43
TRANSFER AGENT AND DIVIDEND PAYING AGENT............................43
ADMINISTRATOR.......................................................43
AUDITORS............................................................44
BROKERAGE ALLOCATION.........................................................44
CAPITALIZATION AND VOTING RIGHTS.............................................45
SPECIAL RIGHTS AND PRIVILEGES................................................46
AUTOMATIC INVESTMENT METHOD.........................................47
EXCHANGE OF SHARES..................................................47
INITIAL SALES CHARGE SHARES................................47
CONTINGENT DEFERRED SALES CHARGE SHARES.............................47
CLASS A....................................................47
CLASS B....................................................48
CLASS C....................................................48
ALL CLASSES................................................49
LETTER OF INTENT....................................................49
RETIREMENT PLANS....................................................50
INDIVIDUAL RETIREMENT ACCOUNTS.............................50
ROTH IRAS..................................................51
QUALIFIED PLANS............................................52
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")...........................52
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS...................53
SIMPLE PLANS...............................................53
REINVESTMENT PRIVILEGE..............................................53
RIGHTS OF ACCUMULATION..............................................54
SYSTEMATIC WITHDRAWAL PLAN..........................................54
GROUP SYSTEMATIC INVESTMENT PROGRAM.................................54
REDEMPTIONS..................................................................55
CONVERSION OF CLASS B SHARES.................................................56
NET ASSET VALUE..............................................................57
TAXATION 58
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.............59
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES..............60
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES..................60
DEBT SECURITIES ACQUIRED AT A DISCOUNT..............................61
DISTRIBUTIONS.......................................................61
DISPOSITION OF SHARES...............................................62
FOREIGN WITHHOLDING TAXES...........................................62
BACKUP WITHHOLDING..................................................63
PERFORMANCE INFORMATION......................................................64
AVERAGE ANNUAL TOTAL RETURN................................64
CUMULATIVE TOTAL RETURN....................................71
FINANCIAL STATEMENTS.........................................................74
APPENDIX A...................................................................76
<PAGE>
78
GENERAL INFORMATION
Ivy Asia Pacific Fund, Ivy China Region Fund, and Ivy Developing
Nations Fund are organized as separate, diversified portfolios 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 separate,
non-diversified portfolio of the Trust. The inception dated for Class A and
Class B shares of Ivy China Region Fund was October 23, 1993. The inception date
for Class A and Class B shares of Ivy Developing Nations Fund and Ivy South
America Fund was November 1, 1994. The inception date for Class C shares of Ivy
China Region Fund, Ivy Developing Nations Fund and Ivy South America Fund was
April 30, 1996. Ivy Asia Pacific Fund commenced operations (Class A, B and C) on
January 1, 1997.
Descriptions in this SAI of a particular investment practice or
technique in which each Fund may engage or a financial instrument which each
Fund may purchase are meant to describe the spectrum of investments that IMI, in
its discretion, might, but is not required to, use in managing each Fund's
portfolio assets. IMI may, in its discretion, at any time employ such practice,
technique or instrument for one or more funds but not for all funds advised by
it. Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of the Fund but, to the extent
employed, could from time to time have a material impact on the Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, is set forth 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.
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.
For temporary or emergency purposes, Ivy Asia Pacific 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.
INVESTMENT RESTRICTIONS FOR ASIA PACIFIC FUND
Ivy Asia Pacific Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund 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.
(ii) Purchase securities on margin, except such short-term credits
as are necessary for the clearance of transactions, but the
Fund may make margin deposits in connection with transactions
in options, futures and options on futures;
(iii) 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 entry into
repurchase agreements with banks or broker-dealers, or (c) the
lending of the Fund's portfolio securities in accordance with
applicable guidelines established by the Securities and
Exchange Commission ("SEC") and any guidelines established by
the Trust's Trustees;
(iv) 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;
(v) 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);
(vi) 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;
(vii) 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;
(viii) Participate in an underwriting or selling group in connection
with the public distribution of securities except for its own
capital stock; or
(ix) 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.
ADDITIONAL RESTRICTIONS
Ivy Asia Pacific 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 15% of its net assets taken at market value at
the time of the 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 the 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;
(iii)purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and
except that the Fund 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;
(iv) sell securities short, except for short sales "against the box;"
or
(v) 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.
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.
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 that (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.
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 member 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.
Ivy China Region 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.
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND
Ivy China Region Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
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,
(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);
(v) participate in an underwriting or selling group in connection
with the public distribution of securities except for its own
capital stock;
(vi) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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 or purposes of this restriction; or
(x) 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.
The Fund will continue to interpret fundamental investment restriction
(vii) 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.
ADDITIONAL RESTRICTIONS
Ivy China Region 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 in companies for the purpose of exercising control of
management;
(iii)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;
(iv) 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; or
(v) invest more than 15% of its net assets taken at market value at
the time of the 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 the 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;
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.
IVY DEVELOPING NATIONS FUND
Ivy Developing Nations 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, Ivy Developing Nations 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,
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.
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.
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING NATIONS FUND
Ivy Developing Nations Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) borrow money, except for temporary or emergency purposes; provided that
the Fund Maintains asset coverage of 300% for all borrowings;
(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, (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 investor
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);
(v) participate in the underwriting or selling group in connection with the
public distribution of securities except for its own capital stock;
(vi) 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 a
brokers for the Fund for customary commissions to the extent permitted by
the Investment Company Act of 1940;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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; or
(x) 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 the issuer; provided, however, that up to
25% of the value of the Fund's total assets may be invested without regard
to these limitations.
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 restrictions (vii) 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.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, Ivy Developing Nations 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 in companies for the purpose of exercising control of
management;
(iii) 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;
(iv) 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; or
(v) 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 the 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.
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.
IVY SOUTH AMERICA FUND
Ivy South America 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, Columbia, 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.
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 limitation 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).
Ivy South America 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.
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND
Ivy South America Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) borrow money, except for temporary or emergency purposes; provided that
the Fund maintains asset coverage of 300% for all borrowings;
(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, (b) the purchase of
publicly distributed bonds, debentures and other securities of a similar
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);
(v) participate in an underwriting or selling group in connection with the
public distribution of securities except for its own capital stock;
(vi) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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
(ix) 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 agreements 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.
The Fund will continue to interpret fundamental investment restriction
(vii) 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.
ADDITIONAL RESTRICTIONS
Ivy South America 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:
(a) invest in oil, gas or other mineral leases or exploration or
development programs;
(b) invest in companies for the purpose of exercising control of
management;
(c) 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;
(d) 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;
(e) 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 the 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; or
(f) 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 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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES
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,
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.
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, the 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.
The 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 the Fund's portfolio securities are denominated may have a
detrimental impact on the 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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). Each 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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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 each 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in that 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 each 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 the Fund to retain or dispose of such 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.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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. Each Fund uses such investment techniques in order to secure what
is considered to be an advantageous price and yield to that Fund and not for
purposes of leveraging the Fund's assets. In either instance, each 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.
ILLIQUID SECURITIES
Each 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 each Fund. It is each 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. Each 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).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), 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 each Fund's domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 each Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Each 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 each 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 each 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 each 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 each 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, each 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 each 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
the 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
each Fund's cash and securities, each 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. Moreover, each Fund may 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 each 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 each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
each Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each 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. Each 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 each Fund normally will be invested in both U.S. and foreign
securities markets, changes in each Fund's share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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 each Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to each Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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 the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to each Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transactions
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy. OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, each Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 any 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 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available in OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would need to negotiate directly with the counterparty to the
transaction.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by that 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 each Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by that 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 the 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
the 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 each 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, the 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. Each Fund may write (sell)
covered call options on that Fund's securities in an attempt to realize a
greater current return than would be realized on the securities alone. Each 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 each Fund for the options).
In view of the investment objectives of each Fund, each Fund generally would
write call options only in circumstances where the investment adviser to that
Fund does not anticipate significant appreciation of the underlying security in
the near future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as any Fund is
obligated as the writer of a call option, that 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each 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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 the Fund must pay. These costs will reduce any profit the
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 any Fund for leverage purposes.
Each 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each 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. Call
options on indices are similar to call 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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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 any 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, that 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that any Fund will be able to close out an
OTC option position at a favorable price prior to its expiration. An OTC
counterparty may fail to delivery or to pay, as the case may be. 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 each Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, each Fund may experience losses in some cases as a result of
such inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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 any Fund, that Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 each 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 a Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing daily net asset value, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each 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.
Each 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 that 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. Each 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.
Each Fund will only enter into 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. Each 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
that 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. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any 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 any Fund seeks to close out a futures or a futures option position, and
that 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 a
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
Each Fund may enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to the equity markets. Each
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 that 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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 each Fund's portfolio diverges from the composition of the
hedging instrument.
Although each 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 a 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, a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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 that 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.
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, each
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 the 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
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"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Bond Fund, Ivy European Opportunities Fund, Ivy Global
Fund, Ivy Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy Pan-Europe Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth Fund. IMI also provides business management services to Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account 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 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 Funds' Custodian and
monitor the services it provides to each 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 each 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 each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
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.
Each Fund pays IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 1.00% of the Fund's average
net assets.
During the fiscal years ended December 31, 1997 and 1998, Ivy Asia
Pacific Fund paid IMI fees of $10,473 and $49,509, respectively. During the
fiscal years ended December 31, 1997 and 1998, IMI reimbursed Fund expenses of
$10,473 and $167,194, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
China Region Fund paid IMI fees of $233,804, $277,601 and $187,381,
respectively. During the fiscal years ended December 31, 1996, 1997 and 1998,
IMI reimbursed Fund expenses of $65,675, $18,377 and $105,095, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Developing Nations Fund paid IMI fees of $109,125, $284,290 and $156,166,
respectively. During the fiscal years ended December 31, 1996, 1997 and 1998,
IMI reimbursed Fund expenses of $67,600, $22,860 and $200,839, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
South America Fund paid IMI fees of $42,550, $94,278 and $53,857, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, IMI reimbursed
Fund expenses of $99,630, $68,548 and $145,687, 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 each 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 that Fund's average net assets, which may lower
each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, 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 the shareholders, continuance (or adoption)
shall be effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of each Fund. See "Capitalization and Voting
Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). The Distribution Agreement was last
approved by the Board on September 17, 1998. IMDI distributes shares of each
Fund 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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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 each Fund's 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 year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Asia Pacific Fund $45,623 in sales commissions,
of which $4,654 was retained after dealer allowances. During the fiscal year
ended December 31, 1998, IMDI received $9,632 in CDSCs on redemptions of Class B
shares of Ivy Asia Pacific Fund. During the fiscal year ended December 31, 1998,
IMDI received $1,724 in CDSCs on redemptions of Class C shares of Ivy Asia
Pacific Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy China Region Fund $57,500 in sales commissions,
of which $6,494 was retained after dealer allowances. During the fiscal year
ended December 31, 1998, IMDI received $42,712 in CDSCs on redemptions of Class
B shares of Ivy China Region Fund. During the fiscal year ended December 31,
1998, IMDI received $13,955 in CDSCs on redemption of Class C shares of Ivy
China Region Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Developing Nations Fund $25,728 in sales
commissions, of which $2,583 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $43,915 in CDSCs on
redemptions of Class B shares of Ivy Developing Nations Fund. During the fiscal
year ended December 31, 1998, IMDI received $1,125 in CDSCs on redemptions of
Class C shares of Ivy Developing Nations Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy South America Fund $2,139 in sales commissions,
of which $275 was retained after dealer allowances. During the fiscal year ended
December 31, 1998, IMDI received $15,485 in CDSCs on redemptions of Class B
shares of Ivy South America Fund. During the fiscal year ended December 31,
1998, IMDI received $315 in CDSCs on redemptions of Class C shares of Ivy South
America Fund.
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 each
Fund. The Distribution Agreement may be terminated with respect to each Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by each 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. The 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
each Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 each Fund's 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 each 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. This fee constitutes reimbursement to IMDI of service fee expenses incurred
by IMDI. 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 each Fund, answering routine inquiries concerning each 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 each 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. Each Class A Plan does not provide for the payment of interest or
carrying charges as distribution expenses.
Under each Fund's 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. This
fee constitutes compensation to IMDI and is not dependent on expenses incurred
by IMDI. 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 each Fund's 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 Independent Trustees 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 each 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.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii)in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1998, Ivy Asia Pacific
Fund paid IMDI $4,383 pursuant to its Class A plan, $16,038 pursuant to its
Class B plan, and $15,941 pursuant to its Class C plan.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Asia Pacific Fund:
advertising $167; printing and mailing of prospectuses to persons other than
current shareholders, $3,297; compensation to dealers, $947; compensation to
sales personnel, $5,160; seminars and meetings, $237; travel and entertainment,
$411; general and administrative, $2,928; telephone, $148; and occupancy and
equipment rental, $419.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Asia Pacific Fund:
advertising $148; printing and mailing of prospectuses to persons other than
current shareholders, $596; compensation to dealers, $14,619; compensation to
sales personnel, $4,710; seminars and meetings, $3,655; travel and
entertainment, $378; general and administrative, $2,690; telephone, $136; and
occupancy and equipment rental, $386.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Asia Pacific Fund:
advertising $147; printing and mailing of prospectuses to persons other than
current shareholders, $2,341 compensation to dealers, $12,074; compensation to
sales personnel, $4,677; seminars and meetings, $3,019; travel and
entertainment, $376; general and administrative, $2,665; telephone, $134; and
occupancy and equipment rental, $382.
During the fiscal year ended December 31, 1998, Ivy China Region Fund
paid IMDI $28,156 pursuant to its Class A plan, $64,686 pursuant to its Class B
plan, and $9,992 pursuant to its Class C plan.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy China Region Fund:
advertising $1,000; printing and mailing of prospectuses to persons other than
current shareholders, $10,678; compensation to dealers, $5,472; compensation to
sales personnel, $30,984; seminars and meetings, $1,368; travel and
entertainment, $2,450; general and administrative, $17,729; telephone, $904; and
occupancy and equipment rental, $2,651.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy China Region Fund:
advertising $575; printing and mailing of prospectuses to persons other than
current shareholders, $6,089; compensation to dealers, $35,423; compensation to
sales personnel, $18,063; seminars and meetings, $8,856; travel and
entertainment, $1,432; general and administrative, $10,364; telephone, $530; and
occupancy and equipment rental, $1,552.
During the fiscal year end December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy China Region Fund:
advertising $95; printing and mailing of prospectuses to persons other than
current shareholders, $959; compensation to dealers, $3,106; compensation to
sales personnel, $2,803; seminars and meetings, $776; travel and entertainment,
$220; general and administrative, $1,586; telephone, $80; and occupancy and
equipment rental, $235.
During the fiscal year ended December 31, 1998, Ivy Developing Nations
Fund paid IMDI $15,514 pursuant to its Class A plan, $72,269 pursuant to its
Class B plan, and $21,356 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Developing Nations Fund:
advertising $545; printing and mailing of prospectuses to persons other than
current shareholders, $3,387; compensation to dealers, $2,982; compensation to
sales personnel $17,142; seminars and meetings, $745; travel and entertainment,
$1,352; general and administrative, $9,886; telephone, $510; and occupancy and
equipment rental, $1,518.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Developing Nations Fund:
advertising, $647; printing and mailing of prospectuses to persons other than
current shareholders, $3,854; compensation to dealers, $39,427; compensation to
sales personnel, $20,232; seminars and meetings, $9,857; travel and
entertainment, $1,603; general and administrative, $11,600; telephone, $592; and
occupancy and equipment rental $1,739.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Developing Nations Fund:
advertising, $193; printing and mailing of prospectuses to persons other than
current shareholders, $1,121; compensation to dealers, $9,062; compensation to
sales personnel, $6,087; seminars and meetings, $2,266; travel and
entertainment, $483; general administrative, $3,497; telephone, $179; and
occupancy and equipment rental, $523.
During the fiscal year ended December 31, 1998, Ivy South America Fund
paid IMDI $7,893; pursuant to its Class A plan, $19,401; pursuant to its Class B
plan, and $2,882 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy South America Fund:
advertising $267; printing and mailing of prospectuses to persons other than
current shareholders, $2,032; compensation to dealers, $1,246; compensation to
sales personnel $8,327; seminars and meetings, $312; travel and entertainment,
$657; general and administrative, $4,785; telephone, $246; and occupancy and
equipment rental, $727.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy South America Fund:
advertising, $170; printing and mailing of prospectuses to persons other than
current shareholders, $1,262; compensation to dealers, $5,874; compensation to
sales personnel, $5,237; seminars and meetings, $1,468; travel and
entertainment, $413; general and administrative, $3,001; telephone, $153; and
occupancy and equipment rental $454.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy South America Fund:
advertising, $25; printing and mailing of prospectuses to persons other than
current shareholders, $189; compensation to dealers, $334; compensation to sales
personnel, $776; seminars and meetings, $84; travel and entertainment, $62;
general administrative, $445; telephone, $23; and occupancy and equipment
rental, $67.
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 each 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 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, MIMI provides certain
accounting and pricing services for each Fund. 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 the 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.
During the fiscal year ended December 31, 1998, Ivy Asia Pacific
Fund paid MIMI $19,790 under the agreement.
During the fiscal year ended December 31, 1998, Ivy China Region Fund
paid MIMI $36,178 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Developing Nations
Fund paid MIMI $34,475 under the agreement.
During the fiscal year ended December 31, 1998, Ivy South America Fund
paid MIMI $19,918 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
for each open Class A, Class B, Class C and Advisor Class account. In addition,
the 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, 1998 for Ivy Asia Pacific Fund totaled $16,060.
Such fees and expenses for the fiscal year ended December 31, 1998 for Ivy China
Region Fund totaled $101,423. Such fees and expenses for the fiscal year ended
December 31, 1998 for Ivy Developing Nations Fund totaled $71,214. Such fees and
expenses for the fiscal year ended December 31, 1998 for Ivy South America Fund
totaled $22,160. Certain broker-dealers that maintain shareholder accounts with
each 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., 0.10%) 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 0.10% of the
Fund's average daily net assets. Such fees for the fiscal year ended December
31, 1998 for Ivy Asia Pacific Fund totaled $4,951. Such fees for the fiscal year
ended December 31, 1998 for Ivy China Region totaled $18,738. Such fees for the
fiscal year ended December 31, 1998 for Ivy Developing Nations Fund totaled
$15,617. Such fees for the fiscal year ended December 31, 1998 for Ivy South
America Fund totaled $5,386.
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
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 each
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 the Funds 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, 1997 and 1998, Ivy Asia
Pacific Fund paid brokerage commissions of $18,500, and $75,104, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
China Region Fund paid brokerage commissions of $62,812, $70,846, and $112,289,
respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Developing Nations Fund paid brokerage commissions of $95,606, $170,306, and
$83,565, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
South America Fund paid brokerage commissions of $15,756, $17,213, and $19,922,
respectively.
Brokerage commissions vary from year to year in accordance with the
extent to which a particular Fund is more or less actively traded.
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 deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each 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 each Fund's
shares with securities and may discontinue accepting securities as payment for
each Fund's 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 Fund, and each Fund's 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund, as well as Class I
shares for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to a 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 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 a Fund, the matter shall have been effectively
acted upon with respect to that 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Bond Fund, Ivy European Opportunities 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 International Strategic Bond Fund,
Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy US Blue Chip Fund, and Ivy US
Emerging Growth Fund (the other eighteen series of the Trust). (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 a Fund's shares, is available for all classes of shares. 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 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).
Each Fund may, from time to time, waive the initial sales charge on
its Class A shares sold to clients of The Legend Group and United Planners
Financial Services of America, Inc. This privilege will apply only to Class A
Shares of a Fund that are purchased using all or a portion of the proceeds
obtained by such clients through redemptions of shares of a mutual fund (other
than one of the Funds) on which a sales charge was paid (the "NAV transfer
privilege"). Purchases eligible for the NAV transfer privilege must be made with
in 60 days of redemption from the other fund, and the Class A shares purchased
are subject to a 1.00% CDSC on shares redeemed within the first year after
purchase. The NAV transfer privilege also applies to Fund shares purchased
directly by clients of such dealers as long as their accounts are linked to the
dealer's master account. The normal service fee, as described in the "Initial
Sales Charge Alternative - Class A Shares" section of the Prospectus, will be
paid to those dealers in connection with these purchases. IMDI may from time to
time pay a special cash incentive to The Legend Group or United Planners
Financial Services of America, Inc. in connection with sales of shares of a Fund
by its registered representative under the NAV transfer privilege. Additional
information on sales charge reductions or waivers may be obtained from IMDI at
the address listed on the cover of this Statement of Additional Information.
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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
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 1.00% if redeemed within one year of
the date of purchase.)
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. 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 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.
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 Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities 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 II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, Ivy
Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth 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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
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 that
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 each 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 such funds
(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 all funds other than Ivy Bond;
or $100,000 or more for Ivy Bond 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 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 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 each 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 each 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.
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.
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 each 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 that 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 that 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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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 each Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among that 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
the Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), 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 Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on a
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds not price their shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 a Fund.
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 each 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 each 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 a 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 each 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 that Fund. If a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if that 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 each 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 each 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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, that 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. The 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.
Each 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, each 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 each 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 each 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. Each 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 each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by that 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 each 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, that Fund will
be eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and similar taxes paid by the 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 the 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 the 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 the
Fund's income flows through to its shareholders. With respect to each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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 a 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 each 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 each Fund 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of that 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that 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
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 each Fund 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%.
Each 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 and Class C shares of each Fund
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 the 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 Fund.
IVY ASIA PACIFIC FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31,
1998
(12.21)% (12.10)% (8.29)%
Inception [#] to year ended December 31, 1998:
(27.29)% (27.09)% (28.60)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31,
1998
(6.86)% (7.48)% (7.37)%
Inception [#] to year ended December 31, 1998:
(25.04)% (25.53)% (28.60)%
- ------------------------- ----------------- ------------------ ---------------
[*] 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 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 the Fund (and Class A, Class B and Class C
shares of the Fund) was January 1, 1997.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998 and
the one year ended December 31, 1998 would have been (29.90)% and (16.09)%,
respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998 and
the one year ended December 31, 1998 would have been (29.04)% and (14.64)%,
respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998 and
the one year ended December 31, 1998 would have been (30.75)% and (11.32)%,
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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (27.77)% and
(10.95)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (27.58)% and
(10.13)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (30.75)% and
(10.40)%, respectively.
IVY CHINA REGION FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31,
1998
(25.13)% (24.99)% (21.81)%
Five years ended
December 31, 1998
(11.68)% (11.63)% N/A
Inception [#] to year
ended December 31,
1998[7]: (8.76)% (8.55)% (13.93)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31,
1998
(20.56)% (21.04)% (21.02)%
Five years ended
December 31, 1998
(10.63)% (11.27)% N/A
Inception [#] to year
ended December 31,
1998[7]: (7.71)% (8.38)% (13.93)%
- ------------------------- ----------------- ---------------------
[*] 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 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 the Fund (and Class A and Class B shares of
the Fund) was October 23, 1993. The inception date for Class C shares was April
30, 1996.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998
and the one year and five years ended December 31, 1998 would have been
(9.17)%, (25.68)%, and (12.07)%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998
and the one year and five years ended December 31, 1998 would have been
(8.93)%, (25.47)%, and (11.99)%, respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998 and
the one year ended December 31, 1998 would have been (14.27)%, and (22.47)%,
respectively. (Since the inception date for Class C shares was April 30,
1996, there were no outstanding Class C shares for the duration of the
five year period ended December 31, 1998.)
[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 period from inception through December 31,
1998 and the one year and five years ended December 31, 1998 would have been
(8.12)%, (21.14)%, and (11.02)%, 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 period from inception through December 31,
1998 and the one year and five years ended December 31, 1998 would have been
(8.76)%, (21.54)%, and (11.63)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (14.27)%, and
(21.68)%, respectively. (Since the inception date for Class C shares was
April 30, 1996, there were no Class C shares outstanding for the five year
period ended December 31, 1998.)
[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]
Year ended December 31, (16.75)% (16.73)% (13.16)%
1998:
Inception [#] to year (10.76)% (10.60)% (15.22)%
ended December 31,
1998[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, (11.67)% (12.35)% (12.16)%
1998:
Inception [#] to year (9.49)% (10.17)% (15.22)%
ended December 31,
1998[7]:
- ------------------------- ----------------- ------------------ ----------------
[*] 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 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 the 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.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998 and
the one year ended December 31, 1998 would have been (12.39)% and (18.01)%,
respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998
and the one year ended December 31, 1998 would have been (12.19)% and (18.01)%,
respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998
and the one year ended December 31, 1998 would have been(15.63)% and (14.14)%,
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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (11.12)% and
(13.00)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (11.77)% and
(13.68)%, 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 period from inception through
December 31, 1998 and the one year ended December 31, 1998 would have been
(15.63)% and (13.14)%, respectively.
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY SOUTH AMERICA FUND
<TABLE>
<CAPTION>
STANDARDIZED RETURN[*]
<S> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, (39.74)% (39.76)% (37.69)%
1998
Inception [#] to year (13.13)% (13.00)% (11.75)%
ended December 31,
1998[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, (36.07)% (36.59)% (36.69)%
1998
Inception [#] to year (11.90)% (12.59)% (11.75)%
ended December 31,
1998[7]:
- ------------------------- ----------------------- -----------------------
</TABLE>
[*] 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 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 the Fund (Class A and Class B shares) was
November 1, 1994. The inception date for Class C shares was April 30, 1996.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998
and the one year ended December 31, 1998 would have been (16.79)% and
(42.33)%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998
and the one year ended December 31, 1998 would have been (16.53)% and
(42.28)%, respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998
and the one year ended December 31, 1998 would have been (13.71)% and (40.44)%,
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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (15.59)%
and (38.80)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (16.12)%
and (39.23)%, 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 period from inception through December 31,
1998 and the one year ended December 31, 1998 would have been (13.71)% and
(39.44)%, respectively.
[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 shares of
that. 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, 1998, assuming the maximum
5.75% sales charge has been assessed.
SINCE INCEPTION[*]
ONE YEAR
Class A (12.21)% (46.96)%
Class B (12.10)% (46.67)%
Class C (8.29)% (45.82)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
SINCE INCEPTION[*]
ONE YEAR
Class A (6.86)% (43.72)%
Class B (7.48)% (44.45)%
Class C (7.37)% (45.82)%
- ---------------------------
[*] The inception date for the Fund (Class A, Class B and Class C shares) was
January 1, 1997.
IVY CHINA REGION FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A (25.13)% (46.26)% (37.85)%
Class B (24.99)% (46.11)% (37.11)%
Class C (21.81)% N/A (33.01)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A (20.56)% (42.98)% (34.06)%
Class B (21.04)% (45.01)% (36.48)%
Class C (21.02)% N/A (33.01)%
- ---------------------------
[*] The inception date for the Fund (Class A and Class B shares) was
October 23, 1993. 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, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE
INCEPTION[*]
Class A (16.75)% (37.81)%
Class B (16.73)% (37.96)%
Class C (13.16)% (35.67)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE
INCEPTION[*]
Class A (11.67)% (34.01)%
Class B (12.35)% (36.04)%
Class C (12.16)% (35.67)%
- ---------------------------
[*] The inception date for the Fund (Class A and Class B shares)
was November 1, 1994. The inception date for Class C shares
was April 30, 1996.
IVY SOUTH AMERICA FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE
INCEPTION[*]
Class A (39.74)% (44.40)%
Class B (39.76)% (44.05)%
Class C (37.69)% (28.38)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE
INCEPTION[*]
Class A (36.07)% (41.01)%
Class B (36.59)% (42.91)%
Class C (36.69)% (28.38)%
- ---------------------------
[*] The inception date for the 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.
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 each Fund will vary from time to time
depending on market conditions, the composition of each Fund's portfolio and
operating expenses of each Fund. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding each 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's Portfolio of Investments as of December 31, 1998, Statement
of Assets and Liabilities as of December 31, 1998, Statement of Operations for
the fiscal year ended December 31, 1998, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1998, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1998 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING NATIONS 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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Advisor Class shares of Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, and Ivy South America Fund (each a "Fund"). The other
fifteen portfolios of the Trust are described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Funds' Advisor Class shares dated May 3, 1999 (the
"Prospectus"), which may be obtained upon request and without charge from the
Trust at the Distributor's address and telephone number printed below. Advisor
Class shares are only offered to certain investors (see the Prospectus). The
Funds also offer Class A, B and C 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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION.........................................................4
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................4
IVY ASIA PACIFIC FUND..............................................4
INVESTMENT RESTRICTIONS FOR ASIA PACIFIC FUND......................5
IVY CHINA REGION FUND..............................................8
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND..................9
IVY DEVELOPING NATIONS FUND.......................................11
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING NATIONS FUND...........12
IVY SOUTH AMERICA FUND............................................14
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND................15
COMMON STOCKS.....................................................18
CONVERTIBLE SECURITIES............................................18
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES.......................19
THE CHINA REGION..................................................19
SOUTH AMERICAN SECURITIES.........................................20
DEBT SECURITIES...................................................22
IN GENERAL...............................................22
INVESTMENT-GRADE DEBT SECURITIES.........................22
LOW-RATED DEBT SECURITIES................................22
U.S. GOVERNMENT SECURITIES...............................24
ZERO COUPON BONDS........................................25
FIRM COMMITMENT AGREEMENTS AND
"WHEN-ISSUED" SECURITIES...............................25
ILLIQUID SECURITIES...............................................25
FOREIGN SECURITIES................................................26
DEPOSITORY RECEIPTS...............................................27
EMERGING MARKETS..................................................27
FOREIGN CURRENCIES................................................29
FOREIGN CURRENCY EXCHANGE TRANSACTIONS............................29
OTHER INVESTMENT COMPANIES........................................30
REPURCHASE AGREEMENTS.............................................30
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS.................31
COMMERCIAL PAPER..................................................31
BORROWING.........................................................31
WARRANTS..........................................................32
OPTIONS TRANSACTIONS..............................................32
IN GENERAL...............................................32
WRITING OPTIONS ON INDIVIDUAL SECURITIES.................33
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES..............34
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES.....34
RISKS OF OPTIONS TRANSACTIONS............................35
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS................36
IN GENERAL...............................................36
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS...37
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS........38
SECURITIES INDEX FUTURES CONTRACTS................................39
RISKS OF SECURITIES INDEX FUTURES........................39
COMBINED TRANSACTIONS....................................41
PORTFOLIO TURNOVER.........................................................41
TRUSTEES AND OFFICERS......................................................41
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI.................41
INVESTMENT ADVISORY AND OTHER SERVICES.....................................42
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES..............42
DISTRIBUTION SERVICES.............................................44
RULE 18F-3 PLAN..........................................44
CUSTODIAN.........................................................45
FUND ACCOUNTING SERVICES..........................................45
TRANSFER AGENT AND DIVIDEND PAYING AGENT..........................45
ADMINISTRATOR.....................................................46
AUDITORS..........................................................46
BROKERAGE ALLOCATION.......................................................46
CAPITALIZATION AND VOTING RIGHTS...........................................47
SPECIAL RIGHTS AND PRIVILEGES..............................................49
AUTOMATIC INVESTMENT METHOD.......................................49
EXCHANGE OF SHARES................................................50
RETIREMENT PLANS..................................................50
INDIVIDUAL RETIREMENT ACCOUNTS...........................51
ROTH IRAS................................................52
QUALIFIED PLANS..........................................53
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7) ACCOUNT").........54
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS.................54
SIMPLE PLANS.............................................54
SYSTEMATIC WITHDRAWAL PLAN........................................54
GROUP SYSTEMATIC INVESTMENT PROGRAM...............................55
REDEMPTIONS................................................................55
NET ASSET VALUE............................................................56
TAXATION 58
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS...........59
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES............60
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES................60
DEBT SECURITIES ACQUIRED AT A DISCOUNT............................61
DISTRIBUTIONS.....................................................62
DISPOSITION OF SHARES.............................................62
FOREIGN WITHHOLDING TAXES.........................................63
BACKUP WITHHOLDING................................................64
PERFORMANCE INFORMATION....................................................64
AVERAGE ANNUAL TOTAL RETURN..............................65
CUMULATIVE TOTAL RETURN..................................66
FINANCIAL STATEMENTS.......................................................67
APPENDIX A.................................................................68
<PAGE>
69
GENERAL INFORMATION
Ivy Asia Pacific Fund, Ivy China Region Fund, and Ivy Developing
Nations Fund are organized as separate, diversified portfolios 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 separate,
non-diversified portfolio of the Trust. The inception date for Ivy China Region
Fund was October 23, 1993. The inception date for Ivy Developing Nations Fund
and Ivy South America Fund was November 1, 1994. The inception dated for Ivy
Asia Pacific was January 1, 1997. Advisor Class shares of all Funds were first
offered on January 1, 1998.
Descriptions in this SAI of a particular investment practice or
technique in which each Fund may engage or a financial instrument which each
Fund may purchase are meant to describe the spectrum of investments that IMI, in
its discretion, might, but is not required to, use in managing each Fund's
portfolio assets. IMI may, in its discretion, at any time employ such practice,
technique or instrument for one or more funds but not for all funds advised by
it. Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of the Fund but, to the extent
employed, could from time to time have a material impact on the Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, is set forth below.
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 each 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.
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.
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.
For temporary or emergency purposes, Ivy Asia Pacific 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.
INVESTMENT RESTRICTIONS FOR ASIA PACIFIC FUND
Ivy Asia Pacific Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund 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.
(ii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but the Fund may make margin deposits
in connection with transactions in options, futures
and options on futures;
(iii) 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 entry into repurchase agreements with banks or
broker-dealers, or (c) the lending of the Fund's
portfolio securities in accordance with applicable
guidelines established by the Securities and Exchange
Commission ("SEC") and any guidelines established by
the Trust's Trustees;
(iv) 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;
(v) 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);
(vi) 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;
(vii) 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;
(viii) Participate in an underwriting or selling group in
connection with the public distribution of securities
except for its own capital stock; or
(ix) 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.
ADDITIONAL RESTRICTIONS
Ivy Asia Pacific 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 15% of its net assets taken at market value at the time of
the 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 the 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;
(iii)purchase securities of other investment companies, except in connection
with a merger, consolidation or sale of assets, and except that the Fund
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;
(iv) sell securities short, except for short sales "against the box;" or
(v) 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.
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 that (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.
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 member 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.
Ivy China Region 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.
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND
Ivy China Region Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
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, (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);
(v) participate in an underwriting or selling group in connection with the
public distribution of securities except for its own capital stock;
(vi) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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 or purposes of this
restriction; or
(x) 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.
The Fund will continue to interpret fundamental investment restriction
(vii) 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.
ADDITIONAL RESTRICTIONS
Ivy China Region 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 in companies for the purpose of exercising control of
management;
(iii)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;
(iv) 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; or
(v) invest more than 15% of its net assets taken at market value at the
time of the 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 the 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.
IVY DEVELOPING NATIONS FUND
Ivy Developing Nations 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, Ivy Developing Nations 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,
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.
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.
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING NATIONS FUND
Ivy Developing Nations Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) borrow money, except for temporary or emergency purposes; provided that the
Fund Maintains asset coverage of 300% for all borrowings;
(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, (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 investor
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);
(v) participate in the underwriting or selling group in connection with the
public distribution of securities except for its own capital stock;
(vi) 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 a brokers for
the Fund for customary commissions to the extent permitted by the
Investment Company Act of 1940;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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; or
(x) 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 the issuer; provided, however, that up to 25% of the
value of the Fund's total assets may be invested without regard to these
limitations.
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 restrictions (vii) 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.
ADDITIONAL RESTRICTIONS
Ivy Developing Nations 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 in companies for the purpose of exercising control of management;
(iii) 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;
(iv) 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; or
(v) 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 the 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.
IVY SOUTH AMERICA FUND
Ivy South America 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, Columbia, 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.
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 limitation 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).
Ivy South America 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.
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND
Ivy South America Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) borrow money, except for temporary or emergency purposes; provided that the
Fund maintains asset coverage of 300% for all borrowings;
(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, (b) the purchase of
publicly distributed bonds, debentures and other securities of a similar
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);
(v) participate in an underwriting or selling group in connection with the
public distribution of securities except for its own capital stock;
(vi) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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
(ix) 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 agreements 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.
The Fund will continue to interpret fundamental investment restriction
(vii) 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.
<PAGE>
ADDITIONAL RESTRICTIONS
Ivy South America 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 in companies for the purpose of exercising control of management;
(iii)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;
(iv) 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;
(v) 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 the 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; or
(vi) 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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common
stock shares represent a proportionate ownership interest in a company. As
a result, the value of common stock rises and falls with a company's
success or failure. The market value of common stock can fluctuate
significantly, with smaller companies being particularly susceptible to
price swings. Transaction costs in smaller company stocks may also be
higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES
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,
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.
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, the 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.
The 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 the Fund's portfolio securities are denominated may have a
detrimental impact on the 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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). Each 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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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 each 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in that 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 each 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 the Fund to retain or dispose of such 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.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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. Each Fund uses such investment techniques in order to secure what
is considered to be an advantageous price and yield to that Fund and not for
purposes of leveraging the Fund's assets. In either instance, each 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.
ILLIQUID SECURITIES
Each 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 each Fund. It is each 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. Each 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).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), 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 each Fund's domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 each Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Each 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 each 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 each 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 each 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 each 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, each 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 each 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
the 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
each Fund's cash and securities, each 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. Moreover, each Fund may 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 each 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 each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
each Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each 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. Each 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 each Fund normally will be invested in both U.S. and foreign
securities markets, changes in each Fund's share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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 each Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to each Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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 the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to each Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transactions
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, each Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 any 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 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction the Fund
would need to negotiate directly with the counterparty to the transaction.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by that 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 each Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by that 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 the 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
the 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 each 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, the 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. Each Fund may write (sell)
covered call options on that Fund's securities in an attempt to realize a
greater current return than would be realized on the securities alone. Each 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 each Fund for the options).
In view of the investment objectives of each Fund, each Fund generally would
write call options only in circumstances where the investment adviser to that
Fund does not anticipate significant appreciation of the underlying security in
the near future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as any Fund is
obligated as the writer of a call option, that 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each 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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 the Fund must pay. These costs will reduce any profit the
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 any Fund for leverage purposes.
Each 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each 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. Call
options on indices are similar to call 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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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 any 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, that 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that any Fund will be able to close out an
OTC option position at a favorable price prior to its expiration. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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 each Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, each Fund may experience losses in some cases as a result of
such inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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 any Fund, that Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 each 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 a Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing daily net asset value, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each 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.
Each 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 that 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. Each 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.
Each Fund will only enter into 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. Each 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
that 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. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any 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 any Fund seeks to close out a futures or a futures option position, and
that 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 a
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
Each Fund may enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to the equity markets. Each
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 that 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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 each Fund's portfolio diverges from the composition of the
hedging instrument.
Although each 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 a 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, a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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 that 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.
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, each
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 the 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
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"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Bond Fund, Ivy European Opportunities Fund, Ivy Global
Fund, Ivy Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy Pan-Europe Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth Fund. IMI also provides business management services to Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account 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 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 Funds' Custodian and
monitor the services it provides to each 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 each 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 each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
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.
Each Fund pays IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 1.00% of the Fund's average
net assets.
During the fiscal years ended December 31, 1997 and 1998, Ivy Asia
Pacific Fund paid IMI fees of $10,473 and $49,509, respectively. During the same
periods, IMI reimbursed Fund expenses in the amount of $10,473 and $167,194,
respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
China Region Fund paid IMI fees of $233,804, $277,601 and $187,381,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $65,675, $18,377 and $105,095, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Developing Nations Fund paid IMI fees of $109,125, $284,290 and $156,166,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $67,600, $22,860 and $200,839, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
South America Fund paid IMI fees of $42,550, $94,278 and $53,857, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $99,630,
$68,548 and $145,867, 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 each 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 that Fund's average net assets, which may lower
each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, 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 the shareholders, continuance (or adoption)
shall be effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of each Fund. See "Capitalization and Voting
Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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.
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 each
Fund. The Distribution Agreement may be terminated with respect to each Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by each 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. The 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
each Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 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, MIMI provides certain
accounting and pricing services for each Fund. 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 the 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.
During the fiscal year ended December 31, 1998, Ivy Asia Pacific
Fund paid MIMI $19,790 under the agreement.
During the fiscal year ended December 31, 1998, Ivy China Region Fund
paid MIMI $36,178 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Developing Nations
Fund paid MIMI $34,475 under the agreement.
During the fiscal year ended December 31, 1998, Ivy South America Fund paid
MIMI $19,918 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
for each open Class A, Class B, Class C and Advisor Class account. In addition,
the 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, 1998 for Ivy Asia Pacific Fund totaled $16,060.
Such fees and expenses for the fiscal year ended December 31, 1998 for Ivy China
Region Fund totaled $101,423. Such fees and expenses for the fiscal year ended
December 31, 1998 for Ivy Developing Nations Fund totaled $71,214. Such fees and
expenses for the fiscal year ended December 31, 1998 for Ivy South America Fund
totaled $22,160. Certain broker-dealers that maintain shareholder accounts with
each 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., 0.10%) 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 0.10% of the
Fund's average daily net assets. Such fees for the fiscal year ended December
31, 1998 for Ivy Asia Pacific Fund totaled $4,951. Such fees for the fiscal year
ended December 31, 1998 for Ivy China Region totaled $18,738. Such fees for the
fiscal year ended December 31, 1998 for Ivy Developing Nations Fund totaled
$15,617. Such fees for the fiscal year ended December 31, 1998 for Ivy South
America Fund totaled $5,386.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 each
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 the Funds 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, 1997 and 1998, Ivy Asia
Pacific Fund paid brokerage commissions of $18,500 and $75,104, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
China Region Fund paid brokerage commissions of $62,812, $70,846, and $112,289,
respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Developing Nations Fund paid brokerage commissions of $95,606, $170,306, and
$83,565, respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
South America Fund paid brokerage commissions of $15,756, $17,213, and $19,922,
respectively.
Brokerage commissions vary from year to year in accordance with the degree
to which a particular Fund is more or less actively traded.
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 deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each 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 each Fund's
shares with securities and may discontinue accepting securities as payment for
each Fund's 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 Fund, and each Fund's 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund, as well as Class I
shares for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to a 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 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 a Fund, the matter shall have been effectively
acted upon with respect to that 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Bond Fund, Ivy European Opportunities 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 International Strategic Bond Fund,
Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy US Blue Chip Fund, and Ivy US
Emerging Growth Fund (the other fifteen series of the Trust). (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 a Fund's shares, is available for all classes of shares, except
Class I. The minimum initial and subsequent investment under this method for
Advisor Class shares 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, shareholders of each Fund have an
exchange privilege with 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.
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 which may be exchanged into an Ivy fund in which shares are not already
held is $10,000. 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 Advisor Class shares of the Fund to less than $10,000.
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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
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. 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 $250 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 of each 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.
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.
The Trust may redeem the Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in the Advisor Class shares
of 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 $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 each 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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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 each Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among that 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
the Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), 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 Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on a
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds not price their shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 a Fund.
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 each 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 each 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 a 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 each 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 that Fund. If a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if that 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 each 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 each 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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, that 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. The 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.
Each 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, each 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 each 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 each 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. Each 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 each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by that 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 each 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, that Fund will
be eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and similar taxes paid by the 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 the 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 the 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 the
Fund's income flows through to its shareholders. With respect to each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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 a 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 each 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 each Fund 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of that 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that Fund are reinvested
at net asset value in additional shares of the same class during the designated
period. Standardized Return quotations for each Fund 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%.
Each 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").
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 the 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 Fund.
The Standardized Return for Ivy China Region Fund's Advisor Class
shares for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (19.56)%. This figure reflects
expense reimbursement.
Without expense reimbursement, the Standardized Return would have been (19.91)%.
The Standardized Return for Ivy Developing Nations Fund's Advisor Class
shares for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (19.06)%. This figure reflects
expense reimbursement.
Without expense reimbursement, the Standardized Return would have been (19.68)%.
Ivy Asia Pacific Fund and Ivy South America Fund had no outstanding Advisor
Class shares as of December 31, 1998.
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 shares of
that. 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.
The Cumulative Total Return for Ivy China Region Fund's Advisor
Class shares for the period from the date Advisor Class shares were first
offered (January 1, 1998) through December 31, 1998 was (19.56)%. The Cumulative
Total Return for Ivy Developing Nations Fund's Advisor Class shares for the
period from the date Advisor Class shares were first offered (January 1, 1998)
through December 31, 1998 was (19.06)%. Ivy Asia Pacific Fund and Ivy South
America Fund had no outstanding Advisor Class shares as of December 31, 1998.
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 each Fund will vary from time to time
depending on market conditions, the composition of each Fund's portfolio and
operating expenses of each Fund. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding each 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's Portfolio of Investments as of December 31, 1998, Statement
of Assets and Liabilities as of December 31, 1998, Statement of Operations for
the fiscal year ended December 31, 1998, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1998, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1998 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
IVY EUROPEAN OPPORTUNITIES 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
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B and C shares of Ivy Global Fund, Ivy Global Natural Resources Fund,
and Ivy Pan-Europe Fund, and to the Class A, B, C and I shares of Ivy European
Opportunities Fund, Ivy Global Science & Technology Fund, Ivy International Fund
II, and Ivy International Small Companies Fund (each a "Fund"). The other twelve
portfolios of the Trust are described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Fund dated May 3, 1999 (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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(for Ivy Global Natural Resources Fund)
Mackenzie Financial Corporation ("MFC")
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone: (416) 922-5322
<PAGE>
i
TABLE OF CONTENTS
GENERAL INFORMATION...........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS...................................1
IVY EUROPEAN OPPORTUNITIES FUND......................................1
INVESTMENT RESTRICTIONS FOR IVY EUROPEAN OPPORTUNITIES FUND..........2
IVY GLOBAL FUND......................................................4
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND..........................5
IVY GLOBAL NATURAL RESOURCES FUND....................................7
INVESTMENT RESTRICTIONS FOR IVY GLOBAL NATURAL RESOURCES FUND........8
IVY GLOBAL SCIENCE & TECHNOLOGY FUND................................10
INVESTMENT RESTRICTIONS FOR IVY GLOBAL SCIENCE & TECHNOLOGY FUND....11
IVY INTERNATIONAL FUND II...........................................13
INVESTMENT RESTRICTIONS FOR.........................................14
IVY INTERNATIONAL SMALL COMPANIES FUND..............................15
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL
SMALL COMPANIES FUND................................................16
IVY PAN-EUROPE FUND.................................................18
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND.....................19
COMMON STOCKS.......................................................21
CONVERTIBLE SECURITIES..............................................21
SMALL COMPANIES.....................................................22
NATURAL RESOURCES AND PHYSICAL COMMODITIES..........................22
DEBT SECURITIES.....................................................23
IN GENERAL.................................................23
INVESTMENT-GRADE DEBT SECURITIES...........................23
LOW-RATED DEBT SECURITIES..................................23
U.S. GOVERNMENT SECURITIES.................................25
ZERO COUPON BONDS..........................................25
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES....26
ILLIQUID SECURITIES.................................................26
FOREIGN SECURITIES..................................................27
DEPOSITORY RECEIPTS.................................................28
EMERGING MARKETS....................................................28
FOREIGN SOVEREIGN DEBT OBLIGATIONS.........................29
BRADY BONDS................................................29
FOREIGN CURRENCIES..................................................30
FOREIGN CURRENCY EXCHANGE TRANSACTIONS..............................31
OTHER INVESTMENT COMPANIES..........................................32
REPURCHASE AGREEMENTS...............................................32
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS...................32
COMMERCIAL PAPER....................................................32
BORROWING...........................................................33
WARRANTS............................................................33
REAL ESTATE INVESTMENT TRUSTS (REITS)...............................33
OPTIONS TRANSACTIONS................................................33
IN GENERAL.................................................33
WRITING OPTIONS ON INDIVIDUAL SECURITIES...................34
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES................35
RISKS OF OPTIONS TRANSACTIONS..............................35
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..................36
IN GENERAL.................................................36
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS.....37
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS..........38
SECURITIES INDEX FUTURES CONTRACTS..................................39
RISKS OF SECURITIES INDEX FUTURES..........................40
COMBINED TRANSACTIONS......................................41
PORTFOLIO TURNOVER...........................................................41
TRUSTEES AND OFFICERS........................................................41
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI............................41
INVESTMENT ADVISORY AND OTHER SERVICES.......................................42
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES................42
DISTRIBUTION SERVICES...............................................44
RULE 18F-3 PLAN............................................46
RULE 12B-1 DISTRIBUTION PLANS..............................46
CUSTODIAN...........................................................50
FUND ACCOUNTING SERVICES............................................50
TRANSFER AGENT AND DIVIDEND PAYING AGENT............................51
ADMINISTRATOR.......................................................51
AUDITORS............................................................52
BROKERAGE ALLOCATION.........................................................52
CAPITALIZATION AND VOTING RIGHTS.............................................53
SPECIAL RIGHTS AND PRIVILEGES................................................55
AUTOMATIC INVESTMENT METHOD.........................................55
EXCHANGE OF SHARES..................................................55
INITIAL SALES CHARGE SHARES................................55
CONTINGENT DEFERRED SALES CHARGE SHARES.............................56
CLASS A....................................................56
CLASS B....................................................56
CLASS C....................................................57
CLASS I....................................................57
ALL CLASSES................................................57
LETTER OF INTENT....................................................57
RETIREMENT PLANS....................................................58
INDIVIDUAL RETIREMENT ACCOUNTS.............................58
ROTH IRAS..................................................59
QUALIFIED PLANS............................................60
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")........................61
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS...................61
SIMPLE PLANS...............................................61
REINVESTMENT PRIVILEGE..............................................61
RIGHTS OF ACCUMULATION..............................................62
SYSTEMATIC WITHDRAWAL PLAN..........................................62
GROUP SYSTEMATIC INVESTMENT PROGRAM.................................63
REDEMPTIONS..................................................................64
CONVERSION OF CLASS B SHARES.................................................65
NET ASSET VALUE..............................................................65
TAXATION 66
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.............67
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES..............68
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES..................69
DEBT SECURITIES ACQUIRED AT A DISCOUNT..............................69
DISTRIBUTIONS.......................................................70
DISPOSITION OF SHARES...............................................70
FOREIGN WITHHOLDING TAXES...........................................71
BACKUP WITHHOLDING..................................................72
PERFORMANCE INFORMATION......................................................72
AVERAGE ANNUAL TOTAL RETURN.........................................72
CUMULATIVE TOTAL RETURN.............................................83
IVY GLOBAL FUND.....................................................84
IVY GLOBAL NATURAL RESOURCES FUND...................................84
IVY GLOBAL SCIENCE & TECHNOLOGY FUND................................85
IVY INTERNATIONAL FUND II...........................................86
IVY INTERNATIONAL SMALL COMPANIES FUND..............................86
IVY PAN-EUROPE FUND.................................................87
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION...............87
FINANCIAL STATEMENTS.........................................................88
APPENDIX A...................................................................89
<PAGE>
GENERAL INFORMATION
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. Ivy Global Fund commenced operations (Class
A shares) on April 19, 1991. The inception dates for Ivy Global Fund's Class B
and Class C shares were April 1, 1994 and April 30, 1996, respectively. Ivy
Global Science & Technology Fund commenced operations on July 22, 1996. Ivy
Global Natural Resources Fund and Ivy International Small Companies Fund
commenced operations on January 1, 1997. Ivy International Fund II and Ivy
Pan-Europe Fund commenced operations on May 13, 1997. Class C shares of
Pan-Europe Fund were first issued on January 29, 1998. Ivy European
Opportunities Fund will commence operations as of the date of this SAI.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on that Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
Whenever an investment objective, policy or restriction of any 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 that 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 a Fund will not be considered a
violation.
IVY EUROPEAN OPPORTUNITIES FUND
The Fund's investment objective is long-term capital growth by
investing in the securities markets of Europe. The Fund's subadviser, Henderson
Investment Management Limited ("Henderson Investors"), will invest the Fund's
assets in the securities of European companies, including those companies
operating in the emerging markets of Europe and small capitalization companies
operating in the developed markets of Europe. The Fund may also invest in larger
capitalization European companies and European companies which have been subject
to special circumstances, e.g., privatized companies or companies which provide
exceptional value. Although the majority of the Fund's assets will be invested
in equity securities, the Fund may also invest in cash, short-term or long-term
fixed income securities issued by corporations and governments of Europe if
considered appropriate in relation to the then current economic or market
conditions in any country.
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 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 American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"), European Depository
Shares ("EDSs") and Global Depository Shares ("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 Investors Service, Inc. ("Moody's") or BB or below by Standard
& Poor's Ratings Group ("S&P") or, if unrated, considered by Henderson Investors
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. The Fund may purchase Brady Bonds and other sovereign debt of
countries that have restructured or are in the process of restructuring their
sovereign debt. 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 Henderson Investors 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, considered by Henderson
Investors 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.
The Fund may borrow money for temporary, extraordinary or emergency
purposes, provided that the Fund maintains asset coverage of 300% for all
borrowings. 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, 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, interest rate and foreign currency futures contracts,
provided that the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY EUROPEAN OPPORTUNITIES FUND
Ivy European Opportunities Fund's investment objective, as set forth in
the Prospectus under "Investment Objective and Policies," and the investment
restrictions set forth below are fundamental policies of the Fund and may not be
changed with respect to the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. Under these restrictions, the 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;
(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;
(iii) 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;
(iv) purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but the Fund may make margin deposits
in connection with transactions in options, futures
and options on futures;
(v) 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 (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;
(vi) make investments in securities for the purpose of exercising control over
or management of the issuer;
(vii) 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;
(viii) borrow money, except for temporary, extraordinary or
emergency purposes, and provided that the Fund
maintains asset coverage of 300% for all borrowings;
or
(ix) invest in real estate, real estate mortgage loans, commodities or
interests in oil, gas and/or mineral exploration or development programs (other
than securities of companies that invest in or sponsor such 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.
ADDITIONAL RESTRICTIONS
Ivy European Opportunities 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 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 the Fund has written, securities for which
market quotations are not readily available, or other
securities which legally or in the subadviser'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 or to other factors, is
liquid;
(ii) 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;
(iii) purchase or sell real estate limited partnership interests;
(iv) sell securities short, except for short sales "against the
box"; or
(v) 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 subadviser, for the sale or
purchase of portfolio securities shall not be considered
participation in a joint securities trading account.
IVY GLOBAL FUND
Ivy Global 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, 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.
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, Ivy Global 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND
Ivy Global Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, the Fund 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.
(ii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but the Fund may make margin deposits
in connection with transactions in options, futures
and options on futures;
(iii) 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 entry into repurchase agreements with banks or
broker-dealers, or (c) the lending of the Fund's
portfolio securities in accordance with applicable
guidelines established by the Securities and Exchange
Commission ("SEC") and any guidelines established by
the Trust's Trustees;
(iv) 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;
(v) Make investments in securities for the purpose of exercising control over or
management of the issuer;
(vi) 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 for the sale or
purchase of portfolio securities shall not be
considered participation in a joint securities
trading account;
(vii) 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;
(viii) 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;
(ix) 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;
(x) 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;
(xi) 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; or
(xii) 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").
ADDITIONAL RESTRICTIONS
Ivy Global 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) purchase or sell real estate limited partnership interests; or
(ii) purchase or sell interest in oil, gal or mineral leases (other
than securities of companies that invest in or sponsor such
programs).
IVY GLOBAL NATURAL RESOURCES FUND
Ivy Global Natural Resources 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. 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.
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, Ivy Global Natural Resources 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 anytime 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL NATURAL RESOURCES FUND
Ivy Global Natural Resources Fund's investment objectives as set forth
in the "Summary" section of the Prospectus, 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 of the outstanding voting shares
of the Fund. Under these restrictions, the 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;
(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;
(iii) 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;
(iv) purchase securities on margin, except such short-term
credits as are necessary for the clearance of transactions,
but the Fund may make margin deposits in connection with
transactions in options, futures and options on futures;
(v) 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 (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;
(vi) make investments in securities for the purpose of exercising
control over or management of the issuer;
(vii) 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;
(viii) 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;
(ix) 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 market-to market basis in an amount at
least equal to the market value of the securities loaned);
or
(x) invest in real estate, real estate mortgage loans,
commodities or interests in oil, gas and/ 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.
Under the 1940 Act, the Fund is permitted, subject to its 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 (x) 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.
ADDITIONAL RESTRICTIONS
Ivy Global Natural Resources 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 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;
(ii) 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 my be imposed by
the Investment Company Act of 1940 and rules thereunder;
(iii) purchase or sell interests in oil, gas or mineral leases
(other than securities of companies that invest in or
sponsor such programs);
(iv) sell securities short, except for short sales "against the
box;" or
(v) 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.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
Ivy Global Science & Technology 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, 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.
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, Ivy Global Science & Technology 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL SCIENCE & TECHNOLOGY FUND
Ivy Global Science & Technology Fund's investment objective, as set
forth in the "Summary" section of the Prospectus, and 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 1940 Act) of the
Fund's outstanding voting shares. Under these restrictions, the 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;
(ii) purchase securities on margin;
(iii) sell securities short, except for short sales "against the box";
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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;
(ix) 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; or
(x) 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 owner 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.
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 (vii) to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment readily marketable
securities of companies that invest in real estate or interests therein,
including real estate investment trusts.
ADDITIONAL RESTRICTIONS
Ivy Global Science & Technology 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 in companies for the purpose of exercising control
management;
(iii) 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;
(iv) 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.
IVY INTERNATIONAL FUND II
Ivy International Fund II'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.
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL FUND II
Ivy International Fund II's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) make an investment in securities of companies in any
one industry (except obligation 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;
(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;
(iii) participate in an underwriting or selling group in
connection with the public distribution of securities
except for its own capital stock;
(iv) 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;
(v) purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but the Fund may make margin deposits
in connection with transactions in options, futures
and options on futures;
(vi) 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 (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;
(vii) borrow money, except as a temporary measure for
extraordinary or emergency purposes, and provided
that the Fund maintains assets coverage of 300% for
all borrowings;
(viii) 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);
(ix) purchase the securities of any other open-end
investment company, except as part of a plan of
merger or consolidations; or
(x) purchase or sell real estate or commodities and commodity contracts.
Ivy International Fund II will continue to interpret fundamental
investment restriction (x) 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.
Under the Investment Company Act of 1940, the Fund is permitted,
subject to its 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.
ADDITIONAL RESTRICTIONS
Ivy International Fund II 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 in companies for the purpose of exercising control of
management;
(iii) 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; or
(iv) sell securities short, except for short sales, "against the box."
IVY INTERNATIONAL SMALL COMPANIES FUND
Ivy International Small Companies 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.
For temporary or emergency purposes, Ivy International Small Companies
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.
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL SMALL COMPANIES FUND
Ivy International Small Companies Fund's investment objectives as set
forth in the "Summary" section of the Prospectus, 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 of the outstanding voting shares
of the Fund. Under these restrictions, the Fund 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;
(ii) Make investments in securities for the purpose of exercising
control over or management of the issuer;
(iii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of transactions,
but the Fund may make margin deposits in connection with
transactions in options, futures and options on futures;
(iv) 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 entry into
repurchase agreements with banks or broker-dealers, or (c)
the lending of portfolio securities in accordance with
applicable guidelines established by the Securities and
Exchange Commission ("SEC") and any guidelines established
by the Trust's Trustees;
(v) 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;
(vi) 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);
(vii) 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;
(viii) 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;
(ix) 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; or
(x) 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.
<PAGE>
ADDITIONAL RESTRICTIONS
Ivy International Small Companies 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) purchase or sell real estate limited partnership interests;
(ii) purchase or sell interests in oil, gas and mineral leases
(other than securities of companies that invest in or
sponsor such programs);
(iii) invest more than 15% of its net assets taken at market value
at the time of the 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 the 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;
(iv) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets,
and except that the Fund may purchase shares of other
investment companies subject to such restrictions as may be
imposed by the Investment Company Act of 1940 (the "1940
Act") and rules thereunder;
(v) sell securities short, except for short sales "against the
box;" or
(vi) 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.
IVY PAN-EUROPE FUND
Ivy Pan-Europe 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, 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. 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, 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, Ivy Pan-Europe Fund may borrow up
to one-third 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.
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND
Ivy Pan-Europe Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund 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.
(ii) Make investments in securities for the purpose of exercising
control over or management of the issuer;
(iii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of transactions,
but the Fund may make margin deposits in connection with
transactions in options, futures and options on futures;
(iv) 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 entry into
repurchase agreements with banks or broker-dealers, or (c)
the lending of portfolio securities in accordance with
applicable guidelines established by the Securities and
Exchange Commission ("SEC") and any guidelines established
by the Trust's Trustees;
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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; or
(ix) 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.
ADDITIONAL RESTRICTIONS
Ivy Pan-Europe 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) purchase or sell real estate limited partnership interests;
(ii) purchase or sell interests in oil, gas and mineral leases
(other than securities of companies that invest in or
sponsor such programs);
(iii) invest more than 15% of its net assets taken at market value
at the time of the 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 the 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;
(iv) 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;
(v) sell securities short, except for short sales "against the
box;" or
(vi) 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 Manager, for the sale or
purchase of portfolio securities shall not be considered
participation in a joint securities trading account.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
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.
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, that 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 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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). Each 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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which a Fund could sell such securities, and
cause large fluctuations in the daily net asset value of a 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 each 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 each Fund to retain or dispose of such security. However, should any
individual bond held by any Fund be downgraded below a rating of C, IMI
currently intends to dispose of such bond based on then existing market
conditions.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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. The 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.
ILLIQUID SECURITIES
Each 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 each Fund. It is each 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. Each 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).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), 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 each Fund's domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Each 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 each 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 each 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 each 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 each 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, each 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 each 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
each 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
each Fund's cash and securities, each 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 SOVEREIGN DEBT OBLIGATIONS
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 (including Ivy European Opportunities Fund) 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
sovereign debt on which governmental entities have defaulted may be collected in
whole or in part.
BRADY BONDS
Ivy European Opportunities Fund may invest in Brady Bonds, which are
securities created through the exchange of existing commercial bank loans to
public and private entities in certain emerging markets for new bonds in
connection with debt restructurings under a debt restructuring plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Plan debt restructurings have been implemented to date in Argentina,
Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico,
Nigeria, Peru, the Philippines, Poland, Uruguay, and Venezuela.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds, with respect
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, each Fund may 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 each 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 each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
the Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each 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. Each 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 each Fund normally will be invested in both U.S. and foreign
securities markets, changes in each Fund's share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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 each Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to each Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which that Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, a Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 any Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
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 Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Global 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.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligations in an OTC transaction, Fund
would need to negotiate directly with the counterparty.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by that 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 each Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by that 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 the 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
the 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 each 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, the 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. Each Fund may write (sell)
covered call options on each Fund's securities in an attempt to realize a
greater current return than would be realized on the securities alone. Each 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 each Fund, each 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 "covered" call option means generally that so long as a Fund is
obligated as the writer of a call option, that 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. Each
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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 the
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 any Fund for leverage purposes.
Each 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, the 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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, the 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. 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. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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, a Fund may experience losses in some cases as a result of such
inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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, that Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each 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, each 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, each Fund will maintain 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,
each 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, or, if lower, may cover the difference with cash or
short-term securities.
When selling a futures contract, each 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, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each 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.
Each 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. Each 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.
Each Fund will only enter into 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. Each 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. 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 a
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
Each Fund (except Ivy Global Natural Resources Fund) may enter into
securities index futures contracts as an efficient means of regulating the
Fund's exposure to the equity markets. Each 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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each 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 a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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 the 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.
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, each
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 the 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI is a wholly owned subsidiary of Mackenzie Investment Management
Inc. ("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 whose shares are listed for trading on the TSE.
MFC provides investment advisory services to the Fund pursuant to an Investment
Advisory Agreement, and IMI provides business management and investment advisory
services to each of the other Funds pursuant to a Business Management and
Investment Advisory Agreement (each an "Agreement"). IMI provides business
management services to Ivy Global Natural Resources Fund pursuant to a Business
Management Agreement (the "Management Agreement"). IMI currently acts as manager
and investment adviser to the following additional investment companies
registered under the 1940 Act: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China
Region Fund, Ivy Developing Nations Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth Fund.
The Agreements obligate IMI and MFC to make investments for the account
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 and MFC also determine the securities
to be purchased or sold by each Fund and place orders with brokers or dealers
who deal in such securities.
Under the IMI Agreement and the Management 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 each 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 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 each
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. IMI is also responsible
for reviewing the activities of MFC to ensure that Ivy Global Natural Resources
Fund is operated in compliance with its investment objectives and policies and
with the 1940 Act.
Henderson Investment Management Limited ("Henderson"), 3 Finsbury
Avenue, London, England EC2M 2PA, serves as subadviser to Ivy European
Opportunities Fund under an Agreement with IMI. For its services, Henderson
receives a fee from IMI that is equal, on an annual basis, to .50% of the Fund's
average net assets. As of February 1, 1999, Henderson also serves as subadviser
with respect to 50% of the net assets of Ivy International Small Companies Fund,
for which Henderson receives a fee from IMI that is equal, on an annual basis,
to .50% of that portion of the Fund's assets that Henderson manages. Henderson
is an indirect, wholly owned subsidiary of AMP Limited, an Australian life
insurance and financial services company located in New South Wales,
Australia.
Ivy Global Natural Resources Fund pays IMI a monthly fee for providing
business management services at an annual rate of 0.50% of the Fund's average
net assets. For investment advisory services, Ivy Global Natural Resources Fund
pays MFC a monthly fee at an annual rate of 0.50% of its average net assets.
During the fiscal years ended December 31, 1997 and 1998, Ivy Global
Natural Resources Fund paid IMI fees of $32,056 and $20,977, respectively.
During the fiscal years ended December 31, 1997 and 1998, IMI reimbursed Fund
expenses in the amount of $25,180 and $147,952, respectively. During the fiscal
years ended December 31, 1997 and 1998, the Fund paid MFC fees of $32,056 and
$20,977, respectively.
Each other Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of 1.00% of the
Fund's average net assets.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Global Fund paid IMI fees of $301,433, $383,981 and $275,958, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $0, $0
and $98,102, respectively.
During the period from July 22, 1996 (commencement of operations) to
December 31, 1996, and during the fiscal years ended December 31, 1997 and 1998,
Ivy Global Science & Technology Fund paid IMI fees of $20,965, $229,616 and
$280,079, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $14,813, $0 and $0, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal year ended December 31, 1998, Ivy International
Fund II paid IMI fees of $413,862 and $1,356,028, respectively. During the same
periods, IMI reimbursed Fund expenses in the amount of $123,177 and $186,536,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy
International Small Companies Fund paid IMI fees of $28,799 and $34,504,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $28,799 and $134,787, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal year ended December 31, 1998, Ivy Pan-Europe
Fund paid IMI fees of $1,974 and $43,978, respectively. During the same periods,
IMI reimbursed Fund expenses in the amount of $1,974 and $148,399,
respectively.
Under the Agreements, 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 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 that Fund's average net assets, which may lower
each Fund's expenses and increase its yield.
The Agreements will continue in effect with respect to each Fund from
year to year, 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 that 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 the shareholders, continuance (or adoption)
shall be effected with respect to each Fund only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreements may be terminated with respect to each 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 a Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to the Trust. Each
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 each Fund's shares pursuant to an Amended and Restated
Distribution Agreement with the Trust dated March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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 each Fund's 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 year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Global Fund $17,112 in sales commissions, of
which $2,536 was retained after dealer allowances. During the fiscal year ended
December 31, 1998, IMDI received $73,203 in CDSCs on redemptions of Class B
shares of Ivy Global Fund. During the fiscal year ended December 31, 1998, IMDI
received $376 in CDSCs on redemptions of Class C shares of Ivy Global Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Global Natural Resources Fund $3,682 in sales
commissions, of which $580 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $4,102 in CDSCs on
redemptions of Class B shares of Ivy Global Natural Resources Fund. During the
fiscal year ended December 31, 1998, IMDI received $69 in CDSCs on redemptions
of Class C shares of Ivy Global Natural Resources Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Global Science & Technology Fund $54,052 in sales
commissions, of which $7,170 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $61,393 in CDSCs on
redemptions of Class B shares of Ivy Global Science & Technology Fund. During
the fiscal year ended December 31, 1998, IMDI received $3,300 in CDSCs on
redemptions of Class C shares of Ivy Global Science & Technology Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy International Fund II $432,944 in sales
commissions, of which $31,170 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $249,362 in CDSCs on
redemptions of Class B shares of Ivy International Fund II. During the fiscal
year ended December 31, 1998, IMDI received $51,479 in CDSCs on redemptions of
Class C shares of Ivy International Fund II.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy International Small Companies Fund $7,460 in
sales commissions, of which $578 was retained after dealer allowances. During
the fiscal year ended December 31, 1998, IMDI received $3,384 in CDSCs on
redemptions of Class B shares of Ivy International Small Companies Fund. During
the fiscal year ended December 31, 1998, IMDI received $1,506 in CDSCs on
redemptions of Class C shares of Ivy International Small Companies Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Pan-Europe Fund $42,584 in sales commissions, of
which $5,031 was retained after dealer allowances. During the fiscal year ended
December 31, 1998, IMDI received $55,437 in CDSCs on redemptions of Class B
shares of Ivy International Pan-Europe Fund. During the fiscal year ended
December 31, 1998, IMDI received $631 in CDSCs on redemptions of Class C shares
of Ivy Pan-Europe Fund.
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 each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the 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. The 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 each Fund's 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 any 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. This fee constitutes reimbursement to IMDI for fees paid by IMDI. 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 the 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 each Fund's 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. This
fee constitutes compensation to IMDI and is not dependent on IMDI's expenses
incurred. 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 Fund's 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 Independent Trustees 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 each 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.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii)in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1998, Ivy Global Fund paid
IMDI $44,345 pursuant to its Class A plan. During the fiscal year ended December
31, 1998 Ivy Global Fund paid IMDI $90,354 pursuant to its Class B plan. During
the fiscal year ended December 31, 1998, the Fund paid IMDI $6,144 pursuant to
its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Fund: advertising
$1,580; printing and mailing of prospectuses to persons other than current
shareholders, $4,120; compensation to dealers, $8,372; compensation to sales
personnel, $49,694; seminars and meetings, $2,093; travel and entertainment,
$3,947; general and administrative, $28,496; telephone, $1,453; and occupancy
and equipment rental, $4,244.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Fund: advertising,
$805; printing and mailing of prospectuses to persons other than current
shareholders, $2,091; compensation to dealers, $48,238; compensation to sales
personnel, $25,262; seminars and meetings, $12,059; travel and entertainment,
$2,007; general and administrative, $14,473; telephone, $738; and occupancy and
equipment rental $2,150.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Fund: advertising,
$55; printing and mailing of prospectuses to persons other than current
shareholders, $145; compensation to dealers, $2,852; compensation to sales
personnel, $1,687; seminars and meetings, $713; travel and entertainment, $133;
general administrative, $964; telephone, $49; and occupancy and equipment
rental, $144.
During the fiscal year ended December 31, 1998, Ivy Global Natural
Resources Fund paid IMDI $5,281 pursuant to its Class A plan. During the fiscal
year ended December 31, 1998 Ivy Global Natural Resources Fund paid IMDI $19,536
pursuant to its Class B plan. During the fiscal year ended December 31, 1998,
the Fund paid IMDI $932 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Natural Resources
Fund: advertising $179; printing and mailing of prospectuses to persons other
than current shareholders, $4,001; compensation to dealers, $857; compensation
to sales personnel $5,622; seminars and meetings, $214; travel and
entertainment, $444; general and administrative, $3,244; telephone, $167; and
occupancy and equipment rental, $500.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Natural Resources
Fund: advertising, $173; printing and mailing of prospectuses to persons other
than current shareholders, $3,705; compensation to dealers, $6,766; compensation
to sales personnel, $5,345; seminars and meetings, $1,692; travel and
entertainment, $423; general and administrative, $3,056; telephone, $155; and
occupancy and equipment rental $455.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Natural Resources
Fund: advertising, $9; printing and mailing of prospectuses to persons other
than current shareholders, $180; compensation to dealers, $258; compensation to
sales personnel, $251; seminars and meetings, $64; travel and entertainment,
$19; general administrative, $144; telephone, $7; and occupancy and equipment
rental, $20.
During the fiscal year ended December 31, 1998, Ivy Global Science &
Technology Fund paid IMDI $31,407 pursuant to its Class A plan. During the
fiscal year ended December 31, 1998 Ivy Global Science & Technology Fund paid
IMDI $83,768 pursuant to its Class B plan. During the fiscal year ended December
31, 1998, the Fund paid IMDI $70,575 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Science & Technology
Fund: advertising $1,152; printing and mailing of prospectuses to persons other
than current shareholders, $8,036; compensation to dealers, $6,521; compensation
to sales personnel $36,485; seminars and meetings, $1,630; travel and
entertainment, $2,912; general and administrative, $20,884; telephone, $1,060;
and occupancy and equipment rental, $3,061.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Science & Technology
Fund: advertising, $759; printing and mailing of prospectuses to persons other
than current shareholders, $5,270; compensation to dealers, $56,200;
compensation to sales personnel, $23,952; seminars and meetings, $14,050; travel
and entertainment, $1,911; general and administrative, $13,690; telephone, $693;
and occupancy and equipment rental $2,001.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Science & Technology
Fund: advertising, $640; printing and mailing of prospectuses to persons other
than current shareholders, $4,461; compensation to dealers, $33,039;
compensation to sales personnel, $20,289; seminars and meetings, $8,260; travel
and entertainment, $1,620; general administrative, $11,604; telephone, $588; and
occupancy and equipment rental, $1,696.
During the fiscal year ended December 31, 1998, Ivy International Fund
II paid IMDI $59,094 pursuant to its Class A plan. During the fiscal year ended
December 31, 1998 Ivy International Fund II paid IMDI $738,981 pursuant to its
Class B plan. During the fiscal year ended December 31, 1998, the Fund paid IMDI
$377,064 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy International Fund II:
advertising $1,992; printing and mailing of prospectuses to persons other than
current shareholders, $9,663; compensation to dealers, $11,030; compensation to
sales personnel $64,753; seminars and meetings, $2,757; travel and
entertainment, $5,212; general and administrative, $37,144; telephone, $1,881;
and occupancy and equipment rental, $5,371.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy International Fund II:
advertising, $6,200; printing and mailing of prospectuses to persons other than
current shareholders, $29,821; compensation to dealers, $491,360; compensation
to sales personnel, $201,942; seminars and meetings, $122,845; travel and
entertainment, $16,261; general and administrative, $115,875; telephone,
$5,868,and occupancy and equipment rental $16,750.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy International Fund II:
advertising, $3,134; printing and mailing of prospectuses to persons other than
current shareholders, $14,483; compensation to dealers, $178,008 compensation to
sales personnel, $102,332; seminars and meetings, $44,502; travel and
entertainment, $8,243; general administrative, $58,765; telephone, $2,979; and
occupancy and equipment rental, $8,508.
During the fiscal year ended December 31, 1998, Ivy International Small
Companies Fund paid IMDI $2,466 pursuant to its Class A plan. During the fiscal
year ended December 31, 1998 Ivy International Small Companies Fund paid IMDI
$10,562 pursuant to its Class B plan. During the fiscal year ended December 31,
1998, the Fund paid IMDI $15,077 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy International Small
Companies Fund: advertising $88; printing and mailing of prospectuses to persons
other than current shareholders, $2,438; compensation to dealers, $466;
compensation to sales personnel $2,785; seminars and meetings, $116; travel and
entertainment, $222; general and administrative, $1,595; telephone, $81; and
occupancy and equipment rental, $235.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy International Small
Companies Fund: advertising, $96; printing and mailing of prospectuses to
persons other than current shareholders, $2,566; compensation to dealers,
$6,294; compensation to sales personnel, $3,003; seminars and meetings, $1,573;
travel and entertainment, $240; general and administrative, $1,716; telephone,
$86; and occupancy and equipment rental $250.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy International Small
Companies Fund: advertising, $125; printing and mailing of prospectuses to
persons other than current shareholders, $3,578; compensation to dealers,
$4,465; compensation to sales personnel, $3,909; seminars and meetings, $1,116;
travel and entertainment, $311; general administrative, $2,237; telephone, $114;
and occupancy and equipment rental, $329.
During the fiscal year ended December 31, 1998, Ivy Pan-Europe Fund
paid IMDI $4,454 pursuant to its Class A plan. During the fiscal year ended
December 31, 1998 Ivy Pan-Europe Fund paid IMDI $18,920 pursuant to its Class B
plan. During the fiscal year ended December 31, 1998, the Fund paid IMDI $6,909
pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Pan-Europe Fund:
advertising $157; printing and mailing of prospectuses to persons other than
current shareholders, $19,553; compensation to dealers, $885; compensation to
sales personnel $5,148; seminars and meetings, $221; travel and entertainment,
$416; general and administrative, $2,949; telephone, $148; and occupancy and
equipment rental, $421.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Pan-Europe Fund:
advertising, $174; printing and mailing of prospectuses to persons other than
current shareholders, $10,978; compensation to dealers, $18,564; compensation to
sales personnel, $5,898; seminars and meetings, $4,641; travel and
entertainment, $480; general and administrative, $3,394; telephone, $171; and
occupancy and equipment rental $481.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Pan-Europe Fund:
advertising, $66; printing and mailing of prospectuses to persons other than
current shareholders, $6,082; compensation to dealers, $5,687; compensation to
sales personnel, $2,115; seminars and meetings, $1,422; travel and
entertainment, $170; general administrative, $1,207; telephone, $61 and
occupancy and equipment rental, $171.
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 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 each 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, MIMI provides certain
accounting and pricing services for each Fund. 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 the 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.
During the fiscal year ended December 31, 1998, Ivy Global Fund paid
MIMI $37,768 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Global Natural
Resources Fund paid MIMI $19,850 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Global Science &
Technology Fund paid MIMI $38,210 under the agreement.
During the fiscal year ended December 31, 1998, Ivy International Fund
II paid MIMI $101,019 under the agreement.
During the fiscal year ended December 31, 1998, Ivy International Small
Companies Fund paid MIMI $20,384 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Pan-Europe Fund paid
MIMI $19,820 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
for each open Class A, Class B, Class C and Advisor Class account. Each Fund
with Class I shares pays a monthly fee at an annual rate of $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, 1998 for Ivy Global Fund
totaled $74,574. Such fees and expenses for the fiscal year ended December 31,
1998 for Ivy Global Natural Resources Fund totaled $17,966. Such fees and
expenses for the fiscal year ended December 31, 1998 for Ivy Global Science &
Technology Fund totaled $63,868. Such fees and expenses for the fiscal year
ended December 31, 1998 for Ivy International Fund II totaled $316,274. Such
fees and expenses for the fiscal year ended December 31, 1998 for Ivy
International Small Companies Fund totaled $11,287. Such fees and expenses for
the fiscal year ended December 31, 1998 for Ivy Pan-Europe Fund totaled $8,191.
Certain broker-dealers that maintain shareholder accounts with each 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., 0.10%) 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 with respect to its Class I shares) pays MIMI a
monthly fee at the annual rate of 0.10% of the Fund's average daily net assets.
Each Fund with Class I shares pays MIMI a monthly fee at the annual rate of
0.01% of its average daily net assets for Class I. Such fees for the fiscal year
ended December 31, 1998 for Ivy Global Fund totaled $27,596. Such fees for the
fiscal year ended December 31, 1998 for Ivy Global Natural Resources Fund
totaled $4,196. Such fees for the fiscal year ended December 31, 1998 for Ivy
Global Science & Technology Fund totaled $28,008. Such fees for the fiscal year
ended December 31, 1998 for Ivy International Fund II totaled $135,329. Such
fees for the fiscal year ended December 31, 1998 for Ivy International Small
Companies Fund totaled $3,450. Such fees for the fiscal year ended December 31,
1998 for Ivy Pan-Europe Fund totaled $4,398.
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
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
(or for Global Natural Resources Fund, MFC) 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 Funds 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) attempts to deal directly with the principal market makers, except in those
circumstances where IMI (or MFC) believes that a better price and execution are
available elsewhere.
IMI (or MFC) 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) in
servicing all of its accounts. In addition, not all of these services may be
used by IMI (or MFC) in connection with the services it provides to the Fund or
the Trust. IMI (or MFC) 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) will not, however, execute brokerage
transactions other than at the best price and execution.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Global Fund paid brokerage commissions of $90,904, $123,985 and $76,661,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy Global
Natural Resources Fund paid brokerage commissions of $128,646 and $49,752,
respectively.
During the period from July 22, 1996 (commencement of operations) to
December 31, 1996, and during the fiscal years ended December 31, 1997 and 1998,
Ivy Global Science & Technology Fund paid brokerage commissions of $37,065,
$99,546 and $110,302, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal year ended December 31, 1998, Ivy
International Fund II paid brokerage commissions of $332,022 and $225,584,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy
International Small Companies Fund paid brokerage commission of $14,913 and
$5,087, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal year ended December 31, 1998, Ivy Pan-Europe
Fund paid brokerage commissions of $491 and $11,639, respectively.
Brokerage commissions vary from year to year in accordance with the extent
to which a particular Fund is more or less actively traded.
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 (or MFC) deems to be a desirable investment for
each Fund. While no minimum has been established, it is expected that each 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 any Fund
shares with securities and may discontinue accepting securities as payment for
any 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 Fund, and each 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund, as well as Class I
shares for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International
Fund, Ivy International Strategic Bond Fund, Ivy Money Market Fund, Ivy South
America Fund, Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund (the other
twelve series of the Trust). (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 all classes of shares. 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 other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a 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).
Each Fund may, from time to time, waive the initial sales charge on
its Class A shares sold to clients of The Legend Group and United Planners
Financial Services of America, Inc. This privilege will apply on to Class A
Shares of a Fund that are purchased using all or a portion of the proceeds
obtained by such clients through redemptions of shares of a mutual fund (other
than one of the Funds) on which a sales charge was paid (the "NAV transfer
privilege"). Purchases eligible for the NAV transfer privilege must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
after purchase. The NAV transfer privilege also applies to Fund shares purchased
directly by clients of such dealers as long as their accounts are linked to the
dealer's master account. The normal service fee, as described in the "Initial
Sales Charge Alternative - Class A Shares" section of the Prospectus, will be
paid to those dealers in connection with these purchases. IMDI may from time to
time pay a special cash incentive to The Legend Group or United Planners
Financial Services of America, Inc. in connection with sales of shares of a Fund
by its registered representatives under the NAV transfer privilege. Additional
information on sales charge reductions or waivers may be obtained from IMDI at
the address listed on the cover of this Statement of Additional Information.
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 any
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 any 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 any 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
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 1.00% 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 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. No exchange out of any
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 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.
LETTER OF INTENT
Reduced sales charges apply to initial investments in Class A shares of
any 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 Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth 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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of any Fund may reinvest
all or a part of the proceeds of the redemption back into Class A shares of the
same 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 each 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 such funds
(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 all funds other than Ivy Bond;
or $100,000 or more for Ivy Bond 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 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 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 each 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 each 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 any 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.
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 a 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 any Fund.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1000 in any 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 same 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
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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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 each Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), 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 a Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds do not price their shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 each 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 a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each 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, each 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 each 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 each 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. Each 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 each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by each Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 the same 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 each 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, that Fund will
be eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and similar taxes paid by the 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 the 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 each Fund's taxable year whether the foreign taxes
paid by that 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 each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 that 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 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 each 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 any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund 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 each 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of that 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that 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
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 each Fund 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%.
Each 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 (where
applicable) shares of each Fund for the periods indicated. In determining the
average annual total return for a specific class of shares of each 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 each 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
Fund.
<PAGE>
IVY GLOBAL FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31,
1998
2.35% 2.69% 6.30%
Five years ended
December 31, 1998
3.03% N/A N/A
Inception [#] to year
ended December 31,
1998[7]: 6.78% 4.11% (0.06)%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31,
1998
8.59% 7.69% 7.30%
Five years ended
December 31, 1998
4.26% N/A N/A
Inception [#] to year
ended December 31,
1998[7]: 7.61% 4.46% (0.06)%
- ------------------------- ----------------- ------------------ -----------------
[*] 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 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 the Fund (Class A shares) was April 18,
1991. The inception dates for the Class B and Class C shares of the Fund were
April 1, 1994 and April 30, 1996, respectively. Until December 31, 1994,
Mackenzie Investment Management Inc. served as investment adviser to the Fund.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998
and the one and five year periods ended December 31, 1998 would have been
6.10%, 1.90% and 2.87%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998 and
the one year period ended December 31, 1998 would have been 3.96% and 2.31%,
respectively. (Since the inception date for Class B shares was April 1, 1994,
there were no Class B shares outstanding for the duration of the five year
period ended December 31, 1998.)
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been (0.25)% and 5.74%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares for the duration of the five year
period ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 6.92%, 8.12%
and 4.10%, 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 period from inception through December 31, 1998 and the
one year period ended December 31, 1998 would have been 4.32% and 7.29%,
respectively. (Since the inception date for Class B shares was April 1, 1994,
there were no Class B shares outstanding for the duration of the five year
period ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one year period ended December 31, 1998 would have been (0.25)% and 6.74%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares for the duration of the five year
period ended December 31, 1998.)
[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]
Year ended December 31, (33.41)% (33.33)% (31.19)%
1998:
Inception [#] to year (15.68)% (15.45)% (14.17)%
ended December 31,
1998[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, (29.35)% (29.82)% (30.49)%
1998:
Inception [#] to year (13.11)% (13.67)% (14.17)%
ended December 31,
1998[7]:
- ------------------------- ----------------- ------------------ -----------------
[*] 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 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 the Fund was January 1, 1997.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (17.71)% and (36.53)%,
respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (17.42)% and (36.35)%,
respectively.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (17.17)% and (35.88)%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (15.23)% and (32.64)%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (15.70)% and (32.98)%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (17.17)% and (35.23)%,
respectively.
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
<TABLE>
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
STANDARDIZED RETURN[*]
<S> <C> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31,
1998
27.48% 29.20% 33.37% N/A
Inception [#] to year
ended December 31,
1998: [8] 38.96% 40.78% 41.64% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31,
1998
35.26% 34.20% 34.37% N/A
Inception [#] to year
ended December 31,
1998: [8] 42.30% 41.45% 41.64% N/A
- ------------------------- ----------------- ------------------
</TABLE>
[*] The Standardization 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 redemption of Class B or C shares held for the period. Class I shares
are not subject to an initial sales charge 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 the Fund (and Class A, Class B, Class C and
Class I shares of the Fund) was July 22, 1996.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been 38.87% and 27.48%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been 40.73% and 29.20%, respectively.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been 41.59% and 33.37%, respectively.
[4] Class I shares are not subject to an initial sales charge or a
CDSC; therefore the Non-Standardized and Standardized Return figures would be
identical. However, there were no outstanding Class I shares during the periods
indicated.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been 42.28% and 35.26%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been 41.48% and 34.20%,
respectively.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been 41.59% and 34.37%,
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[*]
<TABLE>
<S> <C> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31,
1998
0.50% 0.84% 4.79% N/A
Inception [#] to year
ended December 31,
1998[8]: (6.12)% (5.81)% (3.48)% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31,
1998
6.63% 5.84% 5.79% N/A
Inception [#] to year
ended December 31,
1998[8]: (2.68)% (3.45)% (3.48)% N/A
</TABLE>
[*] 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 redemption of Class B or C shares held for the period. Class I shares
are not subject to an initial sales change or to 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 the Fund (and Class A, Class B, Class C and
Class I shares of the Fund) was May 13, 1997.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (6.20)% and 0.37%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (5.89)% and 0.71%, respectively.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (3.56)% and 4.66%, respectively.
[4] Class I shares are not subject to an initial sales charge or a
CDSC; therefore the Non-Standardized and Standardized Return figures would be
identical. However, there were no outstanding Class I shares during the periods
indicated.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (2.75)% and 6.49%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (3.52)% and 5.71%,
respectively.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (3.56)% and 5.66%,
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 SMALL COMPANIES FUND
STANDARDIZED RETURN[*]
<TABLE>
<S> <C> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31,
1998
(0.81)% (0.54)% 3.55% N/A
Inception [#] to year ended December 31, 1998:
(6.88)% (6.73)% (4.72)% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31,
1998
5.24% 4.46% 4.55% N/A
Inception [#] to year ended December 31, 1998:
(4.06)% (4.79)% (4.72)% N/A
- ------------------------- ----------------- ------------------ ----------------
</TABLE>
[*] The Standardization 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 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 figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (9.63)% and (4.85)%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (9.23)% and (4.44)%, respectively.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (7.85)% and (1.42)%, respectively.
[4] Class I shares are not subject to an initial sales charge or a
CDSC; therefore the Non-Standardized and Standardized Return figures would be
identical. However, there were no outstanding Class I shares during the periods
indicated.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (6.90)% and 0.98%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (7.34)% and 0.38%,
respectively.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (7.85)% and (0.42)%,
respectively.
IVY PAN-EUROPE FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 1998:
0.59% 0.98% N/A
Inception [#] to year
ended December 31,
1998[7]: 3.71% 4.54% 1.67%
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 1998:
6.72% 5.98% N/A
Inception [#] to year
ended December 31,
1998[7]: 7.55% 6.91% 2.38%
- ------------------------- ----------------- ------------------ ----------------
[*] 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 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 the Fund (Class A and Class B shares) was
May 13, 1997. Class C shares were first offered on January 29, 1998.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been (3.92)% and (2.49)%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been 0.19% and (2.11)%, respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998 would
have been 1.09%.
[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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been (0.34)% and 3.48%,
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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been 2.45% and 2.75%, 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 period from inception through December 31,
1998 would have been 2.09%.
[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 particular 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
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 GLOBAL FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION
Class A 2.35% 16.09% 65.88%
Class B 2.69% N/A 21.07%
Class C 6.30% N/A (0.15)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 8.59% 23.17% 76.00%
Class B 7.69% N/A 23.07%
Class C 7.30% N/A (0.15)%
- ---------------------------
[*] The inception date for the was (Class A shares of the Fund)
was April 18, 1993; 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.
IVY GLOBAL NATURAL RESOURCES FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy Global Natural Resources Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A (33.41)% (28.78)%
Class B (33.33)% (28.40)%
Class C (31.19)% (26.26)%
The following table summarizes the calculation of Cumulative Total
Return for Ivy Global Natural Resources Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has not been
assessed.
ONE YEAR SINCE INCEPTION[*]
Class A (29.35)% (24.44)%
Class B (29.82)% (25.41)%
Class C (30.49)% (26.26)%
- ---------------------------
[*] The inception date for the Fund 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, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 27.48% 123.18%
Class B 29.20% 130.37%
Class C 33.37% 134.15%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 35.26% 136.79%
Class B 34.20% 133.37%
Class C 34.37% 134.15%
Class I N/A N/A
- ---------------------------
[*] The inception date for the Fund (Class A, Class B, Class C and 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, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 0.50% (9.84)%
Class B 0.84% (9.35)%
Class C 4.79% (5.62)%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 6.63% (4.34)%
Class B 5.84% (5.58)%
Class C 5.79% (5.62)%
Class I N/A N/A
- ---------------------------
[*] The inception date for the Fund (Class A, Class B, Class C and Class I
shares) was May 13, 1997.
IVY INTERNATIONAL SMALL COMPANIES FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A (0.81)% (13.23)%
Class B (0.54)% (12.95)%
Class C 3.55% (9.19)%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 5.24% (7.94)%
Class B (4.46)% (9.32)%
Class C 4.55% (9.19)%
Class I N/A N/A
- ---------------------------
[*] The inception date for the Fund (Class A, Class B, Class C and
Class I shares) was January 1, 1997.
IVY PAN-EUROPE FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A (0.59)% 6.16%
Class B (0.98)% 7.55%
Class C N/A 2.38%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 6.72% 12.64%
Class B 5.98% 11.55%
Class C N/A 2.38%
- ---------------------------
[*] The inception date for the Ivy Pan-Europe Fund (Class A and Class B
shares) was May 13, 1997. Class C shares were first offered on January 29,
1998.
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 each Fund will vary from time to time
depending on market conditions, the composition of that 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's (except Ivy European Opportunities Fund) Portfolio of
Investments as of December 31, 1998, Statement of Assets and Liabilities as of
December 31, 1998, Statement of Operations for the fiscal year ended December
31, 1998, Statement of Changes in Net Assets for the fiscal year ended December
31, 1998, Financial Highlights, Notes to Financial Statements, and Report of
Independent Accountants, which are included in each Fund's December 31, 1998
Annual Report to shareholders, are incorporated by reference into this SAI. Ivy
European Opportunities Fund's Statement of Assets and Liabilities as of April
28, 1999 and the notes thereto are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 28, 1999
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY EUROPEAN OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
ASSETS
Cash............................................... $ 500,040
Prepaid offering cost.............................. 16,500
Prepaid blue sky fees.............................. 43,000
Total Assets................................... 559,540
--------------
LIABILITIES
Due to affiliate................................... 59,500
--------------
NET ASSETS.............................................. $ 500,040
=========
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)................. $ 10.00
=========
Maximum offering price per share
($10.00 x 100 / 94.25)*........................ $ 10.61
=========
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding)..............................$ 10.00
=========
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding)..............................$ 10.00
=========
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding).............................$ 10.00
=========
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($500,000.00 / 50,000 shares outstanding)................. $ 10.00
=========
NET ASSETS CONSISTS OF:
Capital paid-in $ 500,040
=========
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share
less any applicable contingent deferred sales charge, up to a maximum
of 5%.
*** Redemption price per share is equal to the net asset value per share
less any applicable contingent deferred sales charge, up to a maximum
of 1%.
The accompanying notes are an integral part of the
financial statement.
IVY EUROPEAN OPPORTUNITIES FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
1. ORGANIZATION: Ivy European Opportunities Fund is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C, Class I and
Advisor Class are authorized. Ivy Fund was organized as a Massachusetts business
trust under a Declaration of Trust dated December 21, 1983 and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Fund will commence operations on May 3, 1999. As of the date of this
report, operations have been limited to organizational matters and the issuance
of initial shares to Mackenzie Investment Management Inc. (MIMI).
2. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of $7,100,
comprised of $2,500 for auditing and $4,600 for legal. The full amount of
organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COST AND PREPAID BLUE SKY FEES: Offering cost, consisting of legal
fees, and blue sky fees will be amortized over a one year period beginning May
3, 1999, the date the Fund is expected to commence operations. Offering cost
and blue sky fees have been paid by MIMI and will be reimbursed by the Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly owned
subsidiary of MIMI, is the Manager and Investment Manager of the Fund. For the
current fiscal year, IMI contractually limits the Fund's total operating
expenses (excluding taxes, 12b-1 fees, brokerage commissions, interest,
litigation and indemnification expenses, and any other extraordinary expenses)
to an annual rate of 1.95% of its average net assets. For each of the following
nine years IMI will ensure that these expenses do not exceed 2.50% of the Fund's
average net assets.
MIMI provides certain administrative, accounting and pricing services for the
Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of MIMI, IMI, IMDI and IMSC.
Such individuals are not compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are not affiliated with MIMI
or IMI receive compensation from the Fund. No such amounts have been incurred as
of April 28, 1999.
<PAGE>
IVY EUROPEAN OPPORTUNITIES 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
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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Advisor Class shares of Ivy European Opportunities Fund, Ivy Global 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 (each a "Fund"). The other twelve portfolios of the Trust are described in
separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Advisor Class shares of the Funds dated May 3, 1999
(the "Prospectus"), which may be obtained upon request and without charge from
the Trust at the Distributor's address and telephone number printed below.
Advisor Class shares are only offered to certain investors (see Prospectus). The
Funds also offer Class A, B and C shares (and, in the case of Ivy European
Opportunities Fund, Ivy Global Science & Technology Fund, Ivy International Fund
II, and Ivy International Small Companies Fund, Class I 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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(for Ivy Global Natural Resources Fund)
Mackenzie Financial Corporation ("MFC")
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone: (416) 922-5322
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION..........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..................................1
IVY EUROPEAN OPPORTUNITIES FUND.....................................1
INVESTMENT RESTRICTIONS FOR IVY EUROPEAN OPPORTUNITIES FUND.........2
IVY GLOBAL FUND.....................................................4
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND.........................5
IVY GLOBAL NATURAL RESOURCES FUND...................................7
INVESTMENT RESTRICTIONS FOR IVY GLOBAL NATURAL RESOURCES FUND.......8
IVY GLOBAL SCIENCE & TECHNOLOGY FUND...............................10
INVESTMENT RESTRICTIONS FOR IVY GLOBAL SCIENCE & TECHNOLOGY FUND...11
IVY INTERNATIONAL FUND II..........................................13
INVESTMENT RESTRICTIONS FOR........................................14
IVY INTERNATIONAL SMALL COMPANIES FUND.............................15
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL SMALL COMPANIES FUND.16
IVY PAN-EUROPE FUND................................................18
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND....................19
COMMON STOCKS......................................................21
CONVERTIBLE SECURITIES.............................................21
SMALL COMPANIES....................................................22
NATURAL RESOURCES AND PHYSICAL COMMODITIES.........................22
DEBT SECURITIES....................................................23
IN GENERAL................................................23
INVESTMENT-GRADE DEBT SECURITIES..........................23
LOW-RATED DEBT SECURITIES.................................24
U.S. GOVERNMENT SECURITIES................................25
ZERO COUPON BONDS.........................................26
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES...26
ILLIQUID SECURITIES................................................26
FOREIGN SECURITIES.................................................27
DEPOSITORY RECEIPTS................................................28
EMERGING MARKETS...................................................28
FOREIGN SOVEREIGN DEBT OBLIGATIONS........................29
BRADY BONDS...............................................30
FOREIGN CURRENCIES.................................................31
FOREIGN CURRENCY EXCHANGE TRANSACTIONS.............................31
OTHER INVESTMENT COMPANIES.........................................32
REPURCHASE AGREEMENTS..............................................32
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS..................33
COMMERCIAL PAPER...................................................33
BORROWING..........................................................33
WARRANTS...........................................................33
REAL ESTATE INVESTMENT TRUSTS (REITS)..............................33
OPTIONS TRANSACTIONS...............................................34
IN GENERAL................................................34
WRITING OPTIONS ON INDIVIDUAL SECURITIES..................35
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES...............35
RISKS OF OPTIONS TRANSACTIONS.............................36
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.................37
IN GENERAL................................................37
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS....38
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS.........39
SECURITIES INDEX FUTURES CONTRACTS.................................40
RISKS OF SECURITIES INDEX FUTURES.........................40
COMBINED TRANSACTIONS.....................................41
PORTFOLIO TURNOVER..........................................................41
TRUSTEES AND OFFICERS.......................................................42
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI...........................42
INVESTMENT ADVISORY AND OTHER SERVICES......................................42
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES...............42
DISTRIBUTION SERVICES..............................................45
RULE 18F-3 PLAN...........................................45
CUSTODIAN..........................................................46
FUND ACCOUNTING SERVICES...........................................46
TRANSFER AGENT AND DIVIDEND PAYING AGENT...........................46
ADMINISTRATOR......................................................47
AUDITORS...........................................................47
BROKERAGE ALLOCATION........................................................47
CAPITALIZATION AND VOTING RIGHTS............................................48
SPECIAL RIGHTS AND PRIVILEGES...............................................50
AUTOMATIC INVESTMENT METHOD........................................50
EXCHANGE OF SHARES.................................................50
RETIREMENT PLANS...................................................51
INDIVIDUAL RETIREMENT ACCOUNTS............................51
ROTH IRAS.................................................52
QUALIFIED PLANS...........................................53
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT").....................54
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS..................54
SIMPLE PLANS..............................................54
SYSTEMATIC WITHDRAWAL PLAN.........................................54
GROUP SYSTEMATIC INVESTMENT PROGRAM................................55
REDEMPTIONS.................................................................56
NET ASSET VALUE.............................................................56
TAXATION 58
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS............59
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES.............60
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES.................60
DEBT SECURITIES ACQUIRED AT A DISCOUNT.............................60
DISTRIBUTIONS......................................................61
DISPOSITION OF SHARES..............................................62
FOREIGN WITHHOLDING TAXES..........................................62
BACKUP WITHHOLDING.................................................63
PERFORMANCE INFORMATION.....................................................63
AVERAGE ANNUAL TOTAL RETURN........................................64
CUMULATIVE TOTAL RETURN............................................65
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION..............65
FINANCIAL STATEMENTS........................................................66
APPENDIX A..................................................................67
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GENERAL INFORMATION
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. Ivy Global Fund commenced operations (Class
A shares) on April 19, 1991. Ivy Global Science & Technology Fund commenced
operations on July 22, 1996. Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund commenced operations on January 1, 1997. Ivy
International Fund II and Ivy Pan-Europe Fund commenced operations on May 13,
1997. Ivy European Opportunities Fund will commence operations (all classes) as
of the date of this SAI. Advisor Class shares of all Funds except Ivy European
Opportunities Fund were first offered on January 1, 1998.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on that Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
Whenever an investment objective, policy or restriction of any 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 that 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 a Fund will not be considered a
violation.
IVY EUROPEAN OPPORTUNITIES FUND
The Fund's investment objective is long-term capital growth by
investing in the securities markets of Europe. The Fund's subadviser, Henderson
Investment Management Limited ("Henderson Investors"), will invest the Fund's
assets in the securities of European companies, including those companies
operating in the emerging markets of Europe and small capitalization companies
operating in the developed markets of Europe. The Fund may also invest in larger
capitalization European companies and European companies which have been subject
to special circumstances, e.g., privatized companies or companies which provide
exceptional value. Although the majority of the Fund's assets will be invested
in equity securities, the Fund may also invest in cash, short-term or long-term
fixed income securities issued by corporations and governments of Europe if
considered appropriate in relation to the then current economic or market
conditions in any country.
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 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 American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"), European Depository
Shares ("EDSs") and Global Depository Shares ("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 Investors Service, Inc. ("Moody's") or BB or below by Standard
& Poor's Ratings Group ("S&P") or, if unrated, considered by Henderson Investors
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. The Fund may purchase Brady Bonds and other sovereign debt of
countries that have restructured or are in the process of restructuring their
sovereign debt. 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 Henderson Investors 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, considered by Henderson
Investors 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.
The Fund may borrow money for temporary, extraordinary or emergency
purposes, provided that the Fund maintains asset coverage of 300% for all
borrowings. 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, interest rate and foreign currency futures contracts,
provided that the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY EUROPEAN OPPORTUNITIES FUND
Ivy European Opportunities Fund's investment objective, as set forth in
the Prospectus under "Investment Objective and Policies," and the investment
restrictions set forth below are fundamental policies of the Fund and may not be
changed with respect to the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. Under these restrictions, the 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;
(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;
(iii)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;
(iv) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(v) 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 (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;
(vi) make investments in securities for the purpose of exercising control
over or management of the issuer;
(vii)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;
(viii) borrow money, except for temporary, extraordinary or emergency
purposes, and provided that the Fund maintains asset coverage of 300%
for all borrowings; or
(ix) invest in real estate, real estate mortgage loans, commodities or
interests in oil, gas and/or mineral exploration or development
programs (other than securities of companies that invest in or sponsor
such 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.
ADDITIONAL RESTRICTIONS
Ivy European Opportunities 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 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 the Fund has written, securities for which market quotations are
not readily available, or other securities which legally or in the
subadviser'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 or to other factors, is liquid;
(ii) 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;
(iii) purchase or sell real estate limited partnership interests;
(iv) sell securities short, except for short sales "against the box"; or
(v) 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
subadviser, for the sale or purchase of portfolio securities shall not
be considered participation in a joint securities trading account.
IVY GLOBAL FUND
Ivy Global 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, 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.
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, Ivy Global 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND
Ivy Global Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, the Fund 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.
(ii) Purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(iii)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 entry into repurchase agreements with banks
or broker-dealers, or (c) the lending of the Fund's portfolio
securities in accordance with applicable guidelines established by the
Securities and Exchange Commission ("SEC") and any guidelines
established by the Trust's Trustees;
(iv) 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;
(v) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(vi) 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 for the
sale or purchase of portfolio securities shall not be considered
participation in a joint securities trading account;
(vii)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;
(viii) 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;
(ix) 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;
(x) 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;
(xi) 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; or
(xii)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").
ADDITIONAL RESTRICTIONS
Ivy Global 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) purchase or sell real estate limited partnership interests; or
(ii) purchase or sell interest in oil, gal or mineral leases (other than
securities of companies that invest in or sponsor such programs).
IVY GLOBAL NATURAL RESOURCES FUND
Ivy Global Natural Resources 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. 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.
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, Ivy Global Natural Resources 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 anytime 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL NATURAL RESOURCES FUND
Ivy Global Natural Resources Fund's investment objectives as set forth
in the "Summary" section of the Prospectus, 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 of the outstanding voting shares
of the Fund. Under these restrictions, the 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;
(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;
(iii)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;
(iv) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(v) 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 (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;
(vi) make investments in securities for the purpose of exercising control
over or management of the issuer;
(vii)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;
(viii) 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;
(ix) 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 market-to
market basis in an amount at least equal to the market value of the
securities loaned); or
(x) invest in real estate, real estate mortgage loans, commodities or
interests in oil, gas and/ 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.
Under the 1940 Act, the Fund is permitted, subject to its 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 (x) 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.
ADDITIONAL RESTRICTIONS
Ivy Global Natural Resources 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 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;
(ii) 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 my be imposed by the Investment Company Act of
1940 and rules thereunder;
(iii)purchase or sell interests in oil, gas or mineral leases (other than
securities of companies that invest in or sponsor such programs);
(iv) sell securities short, except for short sales "against the box;" or
(v) 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.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
Ivy Global Science & Technology 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, 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.
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, Ivy Global Science & Technology 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.
INVESTMENT RESTRICTIONS FOR IVY GLOBAL SCIENCE & TECHNOLOGY FUND
Ivy Global Science & Technology Fund's investment objective, as set
forth in the "Summary" section of the Prospectus, and 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 1940 Act) of the
Fund's outstanding voting shares. Under these restrictions, the 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;
(ii) purchase securities on margin;
(iii) sell securities short, except for short sales "against the box";
(iv) 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;
(v) 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;
(vi) 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;
(vii)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;
(viii) 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;
(ix) 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; or
(x) 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 owner 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.
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 (vii) to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment readily marketable
securities of companies that invest in real estate or interests therein,
including real estate investment trusts.
ADDITIONAL RESTRICTIONS
Ivy Global Science & Technology 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 in companies for the purpose of exercising control management;
(iii)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;
(iv) 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.
IVY INTERNATIONAL FUND II
Ivy International Fund II'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.
INVESTMENT RESTRICTIONS FOR
IVY INTERNATIONAL FUND II
Ivy International Fund II's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund may not:
(i) make an investment in securities of companies in any one industry
(except obligation 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;
(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;
(iii)participate in an underwriting or selling group in connection with
the public distribution of securities except for its own capital
stock;
(iv) 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;
(v) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(vi) 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 (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;
(vii)borrow money, except as a temporary measure for extraordinary or
emergency purposes, and provided that the Fund maintains assets
coverage of 300% for all borrowings;
(viii) 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);
(ix) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidations; or
(x) purchase or sell real estate or commodities and commodity contracts.
Ivy International Fund II will continue to interpret fundamental
investment restriction (x) 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.
Under the Investment Company Act of 1940, the Fund is permitted,
subject to its 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.
ADDITIONAL RESTRICTIONS
Ivy International Fund II 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 in companies for the purpose of exercising control of
management;
(iii)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; or
(iv) sell securities short, except for short sales, "against the box."
IVY INTERNATIONAL SMALL COMPANIES FUND
Ivy International Small Companies 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.
For temporary or emergency purposes, Ivy International Small Companies
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.
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL SMALL COMPANIES FUND
Ivy International Small Companies Fund's investment objectives as set
forth in the "Summary" section of the Prospectus, 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 of the outstanding voting shares
of the Fund. Under these restrictions, the Fund 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;
(ii) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(iii)Purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(iv) 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 entry into repurchase agreements with banks
or broker-dealers, or (c) the lending of portfolio securities in
accordance with applicable guidelines established by the Securities
and Exchange Commission ("SEC") and any guidelines established by the
Trust's Trustees;
(v) 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;
(vi) 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);
(vii)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;
(viii) 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;
(ix) 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; or
(x) 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.
<PAGE>
ADDITIONAL RESTRICTIONS
Ivy International Small Companies 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) purchase or sell real estate limited partnership interests;
(ii) purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs);
(iii)invest more than 15% of its net assets taken at market value at the
time of the 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 the 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;
(iv) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and except
that the Fund may purchase shares of other investment companies
subject to such restrictions as may be imposed by the Investment
Company Act of 1940 (the "1940 Act") and rules thereunder;
(v) sell securities short, except for short sales "against the box;" or
(vi) 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.
IVY PAN-EUROPE FUND
Ivy Pan-Europe 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, 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. 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, 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, Ivy Pan-Europe Fund may borrow up
to one-third 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.
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND
Ivy Pan-Europe Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the Fund 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.
(ii) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(iii)Purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, but the Fund may make
margin deposits in connection with transactions in options, futures
and options on futures;
(iv) 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 entry into repurchase agreements with banks
or broker-dealers, or (c) the lending of portfolio securities in
accordance with applicable guidelines established by the Securities
and Exchange Commission ("SEC") and any guidelines established by the
Trust's Trustees;
(v) 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;
(vi) 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;
(vii)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;
(viii) 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; or
(ix) 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.
ADDITIONAL RESTRICTIONS
Ivy Pan-Europe 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) purchase or sell real estate limited partnership interests;
(ii) purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs);
(iii)invest more than 15% of its net assets taken at market value at the
time of the 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 the 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;
(iv) 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;
(v) sell securities short, except for short sales "against the box;" or
(vi) 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 Manager, for the sale or purchase of portfolio securities
shall not be considered participation in a joint securities trading
account.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
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.
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, that 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 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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). Each 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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which a Fund could sell such securities, and
cause large fluctuations in the daily net asset value of a 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 each 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 each Fund to retain or dispose of such security. However, should any
individual bond held by any Fund be downgraded below a rating of C, IMI
currently intends to dispose of such bond based on then existing market
conditions.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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. The 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.
ILLIQUID SECURITIES
Each 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 each Fund. It is each 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. Each 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).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), 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 each Fund's domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Each 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 each 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 each 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 each 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 each 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, each 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 each 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
each 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
each Fund's cash and securities, each 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 SOVEREIGN DEBT OBLIGATIONS
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 (including Ivy European Opportunities Fund) 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
sovereign debt on which governmental entities have defaulted may be collected in
whole or in part.
BRADY BONDS
Ivy European Opportunities Fund may invest in Brady Bonds, which are
securities created through the exchange of existing commercial bank loans to
public and private entities in certain emerging markets for new bonds in
connection with debt restructurings under a debt restructuring plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Plan debt restructurings have been implemented to date in Argentina,
Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico,
Nigeria, Peru, the Philippines, Poland, Uruguay, and Venezuela.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds, with respect
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, each Fund may 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 each 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 each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
the Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each 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. Each 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 each Fund normally will be invested in both U.S. and foreign
securities markets, changes in each Fund's share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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 each Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to each Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which that Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, a Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 any Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the warrant.
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 Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Global 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.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, a Fund
would negotiate directly with the counterparty.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by that 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 each Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by that 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 the 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
the 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 each 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, the 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. Each Fund may write (sell)
covered call options on each Fund's securities in an attempt to realize a
greater current return than would be realized on the securities alone. Each 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 each Fund, each 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 "covered" call option means generally that so long as a Fund is
obligated as the writer of a call option, that 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. Each
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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 the
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 any Fund for leverage purposes.
Each 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, the 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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, the 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. 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. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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, a Fund may experience losses in some cases as a result of such
inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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, that Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each 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, each 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, each Fund will maintain 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,
each 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, or, if lower, may cover the difference with cash or
short-term securities.
When selling a futures contract, each 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, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each 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.
Each 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. Each 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.
Each Fund will only enter into 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. Each 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. 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 a
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
Each Fund (except Ivy Global Natural Resources Fund) may enter into
securities index futures contracts as an efficient means of regulating the
Fund's exposure to the equity markets. Each 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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each 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 a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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 the 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.
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, each
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 the 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI is a wholly owned subsidiary of Mackenzie Investment Management
Inc. ("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 whose shares are listed for trading on the TSE.
MFC provides investment advisory services to the Fund pursuant to an Investment
Advisory Agreement, and IMI provides business management and investment advisory
services to each of the other Funds pursuant to a Business Management and
Investment Advisory Agreement (each an "Agreement"). IMI provides business
management services to Ivy Global Natural Resources Fund pursuant to a Business
Management Agreement (the "Management Agreement"). IMI currently acts as manager
and investment adviser to the following additional investment companies
registered under the 1940 Act: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China
Region Fund, Ivy Developing Nations Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth Fund.
The Agreements obligate IMI and MFC to make investments for the account
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 and MFC also determine the securities
to be purchased or sold by each Fund and place orders with brokers or dealers
who deal in such securities.
Under the IMI Agreement and the Management 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 each 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 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 each
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. IMI is also responsible
for reviewing the activities of MFC to ensure that Ivy Global Natural Resources
Fund is operated in compliance with its investment objectives and policies and
with the 1940 Act.
Henderson Investment Management Limited ("Henderson"), 3 Finsbury
Avenue, London, England EC2M 2PA, serves as subadviser to Ivy European
Opportunities Fund under an Agreement with IMI. For its services, Henderson
receives a fee from IMI that is equal, on an annual basis, to .50% of the Fund's
average net assets. As of February 1, 1999, Henderson also serves as subadviser
with respect to 50% of the net assets of Ivy International Small Companies Fund,
for which Henderson receives a fee from IMI that is equal, on an annual basis,
to .50% of that portion of the Fund's assets that Henderson manages. Henderson
is an indirect, wholly owned subsidiary of AMP Limited, an Australian life
insurance and financial services company located in New South Wales,
Australia.
Ivy Global Natural Resources Fund pays IMI a monthly fee for providing
business management services at an annual rate of 0.50% of the Fund's average
net assets. For investment advisory services, Ivy Global Natural Resources Fund
pays MFC a monthly fee at an annual rate of 0.50% of its average net assets.
During the fiscal years ended December 31, 1997 and 1998, Ivy Global
Natural Resources Fund paid IMI fees of $32,056 and $20,977, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $25,180
and $147,952, respectively. During the fiscal years ended December 31, 1997 and
1998, Ivy Global Natural Resources Fund paid MFC fees of $32,056 and $20,977,
respectively.
Each other Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of 1.00% of the
Fund's average net assets.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Global Fund paid IMI fees of $301,433, $383,981 and $275,958, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $0, $0
and $98,102, respectively.
During the period from July 22, 1996 (commencement of operations) to
December 31, 1996, and during the fiscal years ended December 31, 1997 and 1998,
Ivy Global Science & Technology Fund paid IMI fees of $20,965, $229,616 and
$280,079, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $14,813, $0 and $0, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal year ended December 31, 1998, Ivy International
Fund II paid IMI fees of $413,862 and $1,356,028, respectively. During these
periods IMI reimbursed Fund expenses in the amount of $123,177 and $186,536,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy
International Small Companies Fund paid IMI fees of $28,799 and $34,504,
respectively. During these periods IMI reimbursed Fund expenses in the amount of
$28,799 and $134,787, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal year ended December 31, 1998, Ivy Pan-Europe
Fund paid IMI fees of $1,974 and $43,978, respectively. During these periods IMI
reimbursed Fund expenses in the amount of $1,974 and $148,399, respectively.
Under the Agreements, 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 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 that Fund's average net assets, which may lower
each Fund's expenses and increase its yield.
The Agreements will continue in effect with respect to each Fund from
year to year, 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 that 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 the shareholders, continuance (or adoption)
shall be effected with respect to each Fund only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreements may be terminated with respect to each 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 a Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to the Trust. Each
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 each Fund's shares pursuant to an Amended and Restated
Distribution Agreement with the Trust dated March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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.
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 each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the 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. The Distribution Agreement shall terminate automatically
in the event of its assignment.
If the Distribution Agreement is terminated (or not renewed) with
respect to any of the Ivy funds (or class of shares thereof), it may continue in
effect with respect to any other fund (or class of shares thereof) 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 each 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, MIMI provides certain
accounting and pricing services for each Fund. 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 the 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.
During the fiscal year ended December 31, 1998, Ivy Global Fund paid
MIMI $37,768 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Global Natural
Resources Fund paid MIMI $19,850 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Global Science &
Technology Fund paid MIMI $38,210 under the agreement.
During the fiscal year ended December 31, 1998, Ivy International Fund
II paid MIMI $101,019 under the agreement.
During the fiscal year ended December 31, 1998, Ivy International Small
Companies Fund paid MIMI $20,384 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Pan-Europe Fund
paid MIMI $19,820 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
for each open Class A, Class B, Class C, and Advisor Class account. Each Fund
with Class I shares pays a monthly fee at an annual rate of $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, 1998 for Ivy Global Fund
totaled $74,574. Such fees and expenses for the fiscal year ended December 31,
1998 for Ivy Global Natural Resources Fund totaled $17,966. Such fees and
expenses for the fiscal year ended December 31, 1998 for Ivy Global Science &
Technology Fund totaled $63,868. Such fees and expenses for the fiscal year
ended December 31, 1998 for Ivy International Fund II totaled $316,274. Such
fees and expenses for the fiscal year ended December 31, 1998 for Ivy
International Small Companies Fund totaled $11,287. Such fees and expenses for
the fiscal year ended December 31, 1998 for Ivy Pan-Europe Fund totaled $8,191.
Certain broker-dealers that maintain shareholder accounts with each 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., 0.10%) 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 0.10% of the
Fund's average daily net asset value of its Class A, Class B, Class C, and
Advisor Class shares. Each Fund with Class I shares pays MIMI a monthly fee at
the annual rate of 0.01% of its average daily net assets for Class I. Such fees
for the fiscal year ended December 31, 1998 for Ivy Global Fund totaled $27,596.
Such fees for the fiscal year ended December 31, 1998 for Ivy Global Natural
Resources Fund totaled $4,196. Such fees for the fiscal year ended December 31,
1998 for Ivy Global Science & Technology Fund totaled $28,008. Such fees for the
fiscal year ended December 31, 1998 for Ivy International Fund II totaled
$135,329. Such fees for the fiscal year ended December 31, 1998 for Ivy
International Small Companies Fund totaled $3,450. Such fees for the fiscal year
ended December 31, 1998 for Ivy Pan-Europe Fund totaled $4,398.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
(or for Global Natural Resources Fund, MFC) 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 Funds 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) attempts to deal directly with the principal market makers, except in those
circumstances where IMI (or MFC) believes that a better price and execution are
available elsewhere.
IMI (or MFC) 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) in
servicing all of its accounts. In addition, not all of these services may be
used by IMI (or MFC) in connection with the services it provides to the Fund or
the Trust. IMI (or MFC) 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) will not, however, execute brokerage
transactions other than at the best price and execution.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Global Fund paid brokerage commissions of $90,904, $123,985 and $76,661,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy Global
Natural Resources Fund paid brokerage commissions of $128,646 and $49,752,
respectively.
During the period from July 22, 1996 (commencement of operations) to
December 31, 1996, and during the fiscal years ended December 31, 1997 and 1998,
Ivy Global Science & Technology Fund paid brokerage commissions of $37,065,
$99,546 and $110,302, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal year ended December 31, 1998, Ivy
International Fund II paid brokerage commissions of $332,022 and $225,584,
respectively.
During the fiscal years ended December 31, 1997 and 1998, Ivy
International Small Companies Fund paid brokerage commission of $14,913 and
$5,087, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal year ended December 31, 1998, Ivy Pan-Europe
Fund paid brokerage commissions of $491 and $11,639, respectively.
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 (or MFC) deems to be a desirable investment for
each Fund. While no minimum has been established, it is expected that each 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 any Fund
shares with securities and may discontinue accepting securities as payment for
any 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 Fund, and each 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund, as well as Class I
shares for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International
Fund, Ivy International Strategic Bond Fund, Ivy Money Market Fund, Ivy South
America Fund, Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund (the other
twelve series of the Trust). (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 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, shareholders of each Fund have an
exchange privilege with other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a Fund 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 share. The minimum value of Advisor Class shares which may
be exchanged into an Ivy fund in which shares are not already held is $10,000.
No exchange out of any 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 that Fund to less than $10,000.
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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
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. 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 $250 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 of each 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.
<PAGE>
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 a 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 any Fund.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in any 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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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 each Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), 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 a Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds do not price their shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 each 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 a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each 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, each 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 each 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 each 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. Each 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 each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by each Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 the same 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 each 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, that Fund will
be eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and similar taxes paid by the 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 the 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 each Fund's taxable year whether the foreign taxes
paid by that 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 each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 that 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 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 each 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 any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund 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 each 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of that 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that Fund are reinvested
at net asset value in additional Advisor Class shares during the designated
period. Standardized Return quotations for each Fund 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%.
Each 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").
In determining the average annual total return for a specific class of
shares of each 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 each 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 Fund.
The Standardized Return for the Advisor Class shares of Ivy Global
Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (10.19)%. This figure reflects
expense reimbursement. Without expense reimbursement, the Standardized Return
would have been (10.41)%.
The Standardized Return for the Advisor Class shares of Ivy Global
Science & Technology Fund for the period from the date Advisor Class shares were
first offered (January 1, 1998) through December 31, 1998 was 16.99%.
The Standardized Return for the Advisor Class shares of Ivy
International Fund II for the period from the date Advisor Class shares were
first offered (January 1, 1998) through December 31, 1998 was (0.15)%. This
figure reflects expense reimbursement. Without expense reimbursement, the
Standardized Return would have been (0.24)%.
The Standardized Return for the Advisor Class shares of Ivy Pan-Europe
Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (8.37)%. This figure reflects
expense reimbursement. Without expense reimbursement, the Standardized Return
would have been (11.98)%.
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 particular 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
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.
The Cumulative Total Return for the Advisor Class shares of Ivy
Global Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (10.19)%.
The Cumulative Total Return for the Advisor Class shares of Ivy Global
Science & Technology Fund for the period from the date Advisor Class shares were
first offered (January 1, 1998) through December 31, 1998 was 16.99%.
The Cumulative Total Return for the Advisor Class shares of Ivy
International Fund II for the period from the date Advisor Class shares were
first offered (January 1, 1998) through December 31, 1998 was (0.15)%.
The Cumulative Total Return for the Advisor Class shares of Ivy
Pan-Europe Fund for the period from the date Advisor Class shares were first
offered (January 1, 1998) through December 31, 1998 was (8.37)%.
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 each Fund will vary from time to time
depending on market conditions, the composition of that 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's (except Ivy European Opportunities Fund) Portfolio of
Investments as of December 31, 1998, Statement of Assets and Liabilities as of
December 31, 1998, Statement of Operations for the fiscal year ended December
31, 1998, Statement of Changes in Net Assets for the fiscal year ended December
31, 1998, Financial Highlights, Notes to Financial Statements, and Report of
Independent Accountants, which are included in each Fund's December 31, 1998
Annual Report to shareholders, are incorporated by reference into this SAI. Ivy
European Opportunities Fund's Statement of Assets and Liabilities as of April
28, 1999 and the notes thereto are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 28, 1999
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY EUROPEAN OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
ASSETS
Cash........................................................$ 500,040
Prepaid offering cost....................................... 16,500
Prepaid blue sky fees....................................... 43,000
Total Assets............................................ 559,540
------------
LIABILITIES
Due to affiliate............................................ 59,500
------------
NET ASSETS...................................................... $ 500,040
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)..........................$ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 94.25)*.................................$ 10.61
=======
CLASS B:
Net asset value, offering price and redemption price**
per share ($10.00 / 1 share outstanding)....................$ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price***
per share ($10.00 / 1 share outstanding)....................$ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price
per share ($10.00 / 1 share outstanding)................ $ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price
per share ($500,000.00 / 50,000 shares outstanding)........ $ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $ 500,040
=======
<PAGE>
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 5%.
*** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 1%.
The accompanying notes are an integral part of the financial statement.
IVY EUROPEAN OPPORTUNITIES FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
1. ORGANIZATION: Ivy European Opportunities Fund is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C, Class I and
Advisor Class are authorized. Ivy Fund was organized as a Massachusetts business
trust under a Declaration of Trust dated December 21, 1983 and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Fund will commence operations on May 3, 1999. As of the date of this
report, operations have been limited to organizational matters and the issuance
of initial shares to Mackenzie Investment Management Inc. (MIMI).
2. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of $7,100,
comprised of $2,500 for auditing and $4,600 for legal. The full amount of
organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COST AND PREPAID BLUE SKY FEES: Offering cost, consisting of legal
fees, and blue sky fees will be amortized over a one year period beginning May
3, 1999, the date the Fund is expected to commence operations. Offering cost
and blue sky fees have been paid by MIMI and will be reimbursed by the Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly owned
subsidiary of MIMI, is the Manager and Investment Manager of the Fund. For the
current fiscal year, IMI contractually limits the Fund's total operating
expenses (excluding taxes, 12b-1 fees, brokerage commissions, interest,
litigation and indemnification expenses, and any other extraordinary expenses)
to an annual rate of 1.95% of its average net assets. For each of the following
nine years, IMI will ensure that these expenses do not exceed 2.50% of the
Fund's average net assets.
MIMI provides certain administrative, accounting and pricing services for the
Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of MIMI, IMI, IMDI and IMSC.
Such individuals are not compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are not affiliated with MIMI
or IMI receive compensation from the Fund. No such amounts have been incurred as
of April 28, 1999.
<PAGE>
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US BLUE CHIP 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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B and C shares of Ivy Growth Fund, Ivy Growth with Income Fund and Ivy
US Emerging Growth Fund, and to the Class A, B, C and I shares of Ivy US Blue
Chip Fund (each a "Fund"). The other fifteen portfolios of the Trust are
described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Funds dated May 3, 1999 (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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
iii
TABLE OF CONTENTS
GENERAL INFORMATION...........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS...................................1
IVY GROWTH FUND......................................................1
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND..........................2
IVY GROWTH WITH INCOME FUND..........................................4
INVESTMENT RESTRICTIONS FOR IVY GROWTH WITH INCOME FUND..............5
IVY US BLUE CHIP FUND................................................7
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND....................7
IVY US EMERGING GROWTH FUND.........................................10
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND.............10
COMMON STOCKS.......................................................12
CONVERTIBLE SECURITIES..............................................13
SMALL COMPANIES.....................................................13
ADJUSTABLE RATE PREFERRED STOCKS....................................13
DEBT SECURITIES.....................................................14
IN GENERAL.................................................14
INVESTMENT-GRADE DEBT SECURITIES...........................14
LOW-RATED DEBT SECURITIES..................................14
U.S. GOVERNMENT SECURITIES.................................15
ZERO COUPON BONDS..........................................16
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES....17
ILLIQUID SECURITIES.................................................17
FOREIGN SECURITIES..................................................18
EMERGING MARKETS....................................................19
FOREIGN CURRENCIES..................................................20
FOREIGN CURRENCY EXCHANGE TRANSACTIONS..............................20
REPURCHASE AGREEMENTS...............................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS...................22
COMMERCIAL PAPER....................................................22
BORROWING...........................................................22
WARRANTS............................................................22
REAL ESTATE INVESTMENT TRUSTS (REITS)...............................22
OPTIONS TRANSACTIONS................................................23
IN GENERAL.................................................23
WRITING OPTIONS ON INDIVIDUAL SECURITIES...................24
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES................24
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES.......25
RISKS OF OPTIONS TRANSACTIONS..............................25
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..................26
IN GENERAL.................................................26
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS..........28
SECURITIES INDEX FUTURES CONTRACTS..................................28
RISKS OF SECURITIES INDEX FUTURES..........................29
COMBINED TRANSACTIONS......................................30
PORTFOLIO TURNOVER...........................................................30
TRUSTEES AND OFFICERS........................................................31
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI...................31
INVESTMENT ADVISORY AND OTHER SERVICES.......................................31
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES................31
DISTRIBUTION SERVICES...............................................33
RULE 18F-3 PLAN............................................34
RULE 12B-1 DISTRIBUTION PLANS..............................34
CUSTODIAN...........................................................38
FUND ACCOUNTING SERVICES............................................38
TRANSFER AGENT AND DIVIDEND PAYING AGENT............................38
ADMINISTRATOR.......................................................39
AUDITORS............................................................39
BROKERAGE ALLOCATION.........................................................39
CAPITALIZATION AND VOTING RIGHTS.............................................40
SPECIAL RIGHTS AND PRIVILEGES................................................42
AUTOMATIC INVESTMENT METHOD.........................................42
EXCHANGE OF SHARES..................................................42
INITIAL SALES CHARGE SHARES................................42
CONTINGENT DEFERRED SALES CHARGE SHARES.............................43
CLASS A....................................................43
CLASS B....................................................43
CLASS C....................................................44
CLASS I....................................................44
ALL CLASSES................................................44
LETTER OF INTENT....................................................45
RETIREMENT PLANS....................................................45
INDIVIDUAL RETIREMENT ACCOUNTS.............................46
ROTH IRAS..................................................47
QUALIFIED PLANS............................................47
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")......................48
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS...................49
SIMPLE PLANS...............................................49
REINVESTMENT PRIVILEGE..............................................49
RIGHTS OF ACCUMULATION..............................................49
SYSTEMATIC WITHDRAWAL PLAN..........................................50
GROUP SYSTEMATIC INVESTMENT PROGRAM.................................50
REDEMPTIONS..................................................................51
CONVERSION OF CLASS B SHARES.................................................52
NET ASSET VALUE..............................................................52
TAXATION 54
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.............54
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......................................................
AVERAGE ANNUAL TOTAL RETURN................................60
CUMULATIVE TOTAL RETURN....................................68
IVY GROWTH WITH INCOME FUND..................................................69
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION......71
FINANCIAL STATEMENTS.........................................................72
APPENDIX A...................................................................73
<PAGE>
73
GENERAL INFORMATION
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. Ivy Growth Fund commenced operations (Class
A shares) on March 1, 1984. The inception dates for Ivy Growth Fund's Class B
and Class C shares were October 23, 1993 and April 30, 1996, respectively. Ivy
Growth with Income Fund commenced operations (Class A shares) on April 1, 1984.
The inception dates for the Fund's Class B and Class C shares were October 23,
1993, and April 30, 1996, respectively. Ivy US Blue Chip Fund commenced
operations (Class A, B and C shares) on November 2, 1998. Ivy US Emerging Growth
Fund commenced operations (Class A shares) on March 3, 1993. The inception dates
for Ivy US Emerging Growth Fund's Class B and Class C shares were October 23,
1993 and April 30, 1996, respectively.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on that Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
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.
IVY GROWTH FUND
Ivy Growth Fund's principal investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund invests at
least 65% of its total assets in common stocks and securities convertible into
common stocks. The Fund invests 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 Growth Fund may invest up to 25% of its 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, the 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, 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.
The Fund may 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, 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 a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts
and may also invest in equity real estate investment trusts.
Ivy Growth Fund 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. The 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, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, Ivy Growth 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) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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;
(x) 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);
(xi) 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); or
(xii) purchase the securities of any other open-end investment
company, except as part of a plan of merger or consolidation;
Under the 1940 Act, the Fund is permitted, subject to its 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 (vii) 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.
ADDITIONAL RESTRICTIONS
Ivy Growth 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) 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;
(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;
(v) 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 (included predecessors)
less than three years old; or
(vi) invest more than 5% of the value of its total assets in the
securities of issuers which are not readily marketable.
IVY GROWTH WITH INCOME FUND
Ivy Growth with Income Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. The Fund has some emphasis on
dividend-paying stocks. Under normal conditions, the Fund invests at least 65%
of its total assets in common stocks and securities convertible into common
stocks. The Fund invests 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 Growth with Income Fund may invest up to 25% of its 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, the 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, 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.
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 a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts.
The Fund may also invest in equity real estate investment trusts.
The Fund 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. The 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, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH WITH INCOME FUND
Ivy Growth with Income Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
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) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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;
(x) 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);
(xi) hold more than 10% of the voting securities of an one issuer
(except obligations of domestic banks or the U.S. Government,
it agencies, authorities and instrumentalities); or
(xii) purchase the securities of any other open-end investment
company, except as part of a plan of merger or consolidation.
Under the 1940 Act, the Fund is permitted, subject to the above
investment restrictions, to borrow money only from banks. The Trust has not
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (vii) 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.
ADDITIONAL RESTRICTIONS
Ivy Growth with Income 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) engage in the purchase and sale of puts, calls, straddles or
spreads (except of the extent described in the Prospectus and
in this SAI);
(iii) invest in companies for the purpose of exercising control of
management;
(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;
(v) 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; or
(vi) invest more than 5% of the value of its total assets in the
securities of issuers which are not readily marketable.
IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund will invest
at least 65% of its total assets in the common stocks of companies determined by
IMI to be "Blue Chip." Generally, the median market capitalization of companies
targeted for investment by the Fund will be greater than $5 billion. For
investment purposes, however, Blue Chip companies are those companies whose
market capitalization is greater than $1 billion at the time of investment.
Blue Chip companies are those which occupy (or in IMI's judgment have
the potential to occupy) leading market positions that are expected to be
maintained or enhanced over time. Such companies tend to have a lengthy history
of profit growth and dividend payment, and a reputation for quality management
structure, products and services. Securities of Blue Chip companies generally
are considered to be highly liquid because, compared to those of
lesser-capitalized companies, more shares of these securities are outstanding in
the marketplace and their trading volume tends to be higher.
When circumstances warrant, Ivy US Blue Chip 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 Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's Corporation ("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.
As a fundamental policy, Ivy US Blue Chip Fund may borrow up to 10% of
the value of its total assets, for temporary purposes when it would be
advantageous to do so from an investment standpoint. The Fund may invest up to
5% of its net assets in warrants. The Fund may not invest more than 15% of its
net assets in illiquid securities. The Fund may also invest in equity real
estate investment trusts ("REITs").
The Fund may write put options on securities and stock indices, with
respect to not more than 10% of the value of its net assets, and may write
covered call options with respect to not more than 25% of the value of its net
assets. The Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its total assets. For hedging purposes
only, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip 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 the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. Under these restrictions, the Fund
may not:
(i) invest in real estate, real estate mortgage loans, commodities
and commodity futures contracts although the 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) interest rate and other financial futures contracts and
related options;
(ii) purchase securities on margin, except such short-term credits
as are necessary for the clearance of transactions; the
deposit or payment by the Fund of initial or variation margins
in connection with futures contracts or related options
transactions is not considered the purchase of a security 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
shares;
(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 shares 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;
(vi) invest 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 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;
(ix) borrow amounts in excess of 10% of its total assets, taken at
the lower of cost or market value, as a temporary measure for
extraordinary or emergency purposes or where investment
transactions might advantageously require it; or except in
connection with reverse repurchase agreements, provided that
the Fund maintains net asset coverage of at least 300% for all
borrowings;
(x) purchase securities of any one issuer (except obligations of
domestic banks or the U.S. Government, its agencies,
authorities and instrumentalities) 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; or
(xi) 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 set forth in Section 12(d)(1) of the 1940 Act and
(viii) of Additional Restrictions, below.
Under the 1940 Act, the Fund is permitted, subject to the Fund's
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 (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.
ADDITIONAL RESTRICTIONS
Ivy US Blue Chip 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:
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;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or
spreads (except to the extent described in the Prospectus and
in this SAI);
(iv) invest in companies for the purpose of exercising control of management;
(v) 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;
(vi) purchase or retain securities of any company if officers and
Trustees of the Trust and officers and directors of IMI, 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;
(vii) invest more than 15% of its net assets 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
the 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 such instrument that, due to
the existence of a trading market or to other factors, is liquid;
or
(viii) acquire any securities of registered open-end investment
companies or registered unit investment trusts in reliance on
subparagraphs (f) and (g) of Section 12(d)(1) of the 1940 Act.
IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. Under normal conditions, the
Fund invests at least 65% of its total assets in common stocks and securities
convertible into common stocks. The 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.
Ivy US Emerging Growth Fund may invest up to 25% of its 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, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated as 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.
As a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts.
Ivy US Emerging Growth Fund 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. The 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, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the 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) 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;
(ix) 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; or
(x) 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, the Fund is permitted, subject to its 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 (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.
ADDITIONAL RESTRICTIONS
Ivy US Emerging Growth 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:
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;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or
spreads (except to the extent described in the Prospectus and
in this SAI);
(iv) invest in companies for the purpose of exercising control of
management; or
(v) 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;
(vi) 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;
(vii) 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; or
(viii) 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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
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.
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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). The Funds
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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which that Fund could sell such securities,
and cause large fluctuations in the daily net asset value of that 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 each 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. 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.
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.
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.
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
representing 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 a 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. Ivy US Blue Chip 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, Ivy US
Blue Chip 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.
ILLIQUID SECURITIES
Each 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 each 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 that
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).
FOREIGN SECURITIES
The securities of foreign issuers in which Ivy Growth Fund, Ivy Growth
with Income Fund, and Ivy US Emerging Growth Fund may invest include non-U.S.
dollar-denominated debt securities, Euro dollar securities, sponsored and
unsponsored American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs"), Global Depository Shares ("GDSs")
and related depository instruments, 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 each Fund's
domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 each 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
EMERGING MARKETS
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth 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 each 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 each 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 each 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 each 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, each 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
each 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. Moreover, Ivy Growth Fund, Ivy Growth with Income Fund, and
Ivy US Emerging Growth Fund may 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 each 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 each Fund may incur costs in connection with conversions
between various currencies. Although each Fund's custodian values the Fund's
assets daily in terms of U.S. dollars, each Fund does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. Each 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. Each 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 Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US
Emerging Growth Fund normally will be invested in both U.S. and foreign
securities markets, changes in these Funds' share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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. Foreign currencies
in which each Fund's assets are denominated may be devalued against the U.S.
dollar, resulting in a loss to the Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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 the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may purchase currency forwards and combine such purchases with
sufficient cash or short-term securities to create unleveraged substitutes for
investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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.
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 Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Growth Fund, Ivy Growth with Income Fund, or Ivy US Blue
Chip 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.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would negotiate directly with the counterparty.
Each 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 any Fund, are taxable as ordinary income. See "Taxation."
Each 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 the 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 the 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 each 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, the 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. Each 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. Each 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 each Fund, each 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 "covered" call option means generally that so long as a 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each 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. Each 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.
Each 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 the 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 any Fund for leverage purposes.
Each 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, the 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. Each 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. Call
options on indices are similar to call 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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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, the 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. 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. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of its portfolio turnover and
brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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) 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 each 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any 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 a
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
Each Fund may enter into securities index futures contracts as an
efficient means of regulating that Fund's exposure to the equity markets. Each
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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each 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 a 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, a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options and currency 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 the 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.
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, each
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 the 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.
Each 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.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory services to
the Fund pursuant to a Business Management and Investment Advisory Agreement
(the "Agreement"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund,
Ivy Developing Nations Fund, Ivy European Opportunities Fund, Ivy Global Fund,
Ivy Global Science & Technology Fund, Ivy International Fund, Ivy International
Fund II, Ivy International Small Companies Fund, Ivy International Strategic
Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund, and Ivy South America
Fund. IMI also provides business management services to Ivy Global Natural
Resources Fund.
The Agreement obligates IMI to make investments for the account 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 each 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 each Fund's Custodian and
monitor the services it provides to each 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 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 each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
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 Growth Fund Pays IMI a monthly fee for providing business
management and investment advisory services that is equal, on an annual basis,
to 0.85% of the first $350 million of the Fund's average net assets reduced to
0.75% on its average net assets in excess of $350 million.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth Fund paid IMI fees of $2,608,378, $2,794,304 and $2,722,314,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $12,486, $0 and $0, respectively.
Ivy Growth with Income Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual rate of .75%
of the Fund's average net assets.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth with Income Fund paid IMI fees of $629,322, $624,013 and $702,361,
respectively.
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund each pays IMI a
monthly fee for providing business management and investment advisory services
at an annual rate of 1.00% of the Fund's average net assets.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip
Fund paid IMI fees of $1,687. During the fiscal year ended December 31, 1998,
IMI reimbursed Fund expenses in the amount of $11,052.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy US
Emerging Growth Fund paid IMI fees of $657,579, $973,756 and $985,816,
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 each 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
each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, 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 each 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) with respect to any Fund is presented to the shareholders,
continuance (or adoption) shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at the Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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 each Fund's then-current
prospectus, and the net asset value on which such price is based. Out of that
commission, IMDI may reallow to dealers such concessions 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 year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Growth Fund $71,547 in sales commissions, of
which $10,859 was retained after dealer allowance. During the fiscal year ended
December 31, 1998, IMDI received $25,515 in CDSCs on redemptions of Class B
shares of Ivy Growth Fund. During the fiscal year ended December 31, 1998, IMDI
received $17 in CDSCs on redemption of Class C shares of Ivy Growth Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Growth with Income Fund $49,641 in sales
commissions, of which $7,545 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $72,972 in CDSCs on
redemptions of Class B shares of Ivy Growth with Income Fund. During the fiscal
year ended December 31, 1998, IMDI received $1,527 in CDSCs on redemptions of
Class C shares of Ivy Growth with Income Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy US Blue Chip Fund $12,738 in sales commissions,
of which $1,940 was retained after dealer allowances. During the fiscal year
ended December 31, 1998, IMDI received $0 in CDSCs on redemptions of Class B
shares of Ivy US Blue Chip Fund. During the fiscal year ended December 31, 1998,
IMDI received $0 in CDSCs on redemptions of Class C shares of Ivy US Blue Chip
Fund.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy US Emerging Growth Fund $102,664 in sales
commissions, of which $14,318 was retained after dealer allowances. During the
fiscal year ended December 31, 1998, IMDI received $185,059 in CDSCs on
redemptions of Class B shares of Ivy US Emerging Growth Fund. During the fiscal
year ended December 31, 1998, IMDI received $2,481 in CDSCs on redemptions of
Class C shares of Ivy US Emerging Growth Fund.
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 each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by the 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. The 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 each Fund's 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 the 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. This fee is a reimbursement to IMDI for service fees paid by IMDI. 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 each 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 each Fund's 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. This
fee is paid to IMDI as compensation and is not dependent on IMDI's expenses
incurred. 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 each Fund's 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 any 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 Independent Trustees 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 each 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 a 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.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii)in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1998, Ivy Growth Fund paid
IMDI $176,268 pursuant to it Class A plan. During the fiscal year ended December
31, 1998, Ivy Growth Fund paid IMDI $47,478 pursuant to its Class B plan. During
the fiscal year ended December 31, 1998, Ivy Growth Fund paid IMDI $1,880
pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Growth Fund: advertising
$28,196; printing and mailing of prospectuses to persons other than current
shareholders, $53,162; compensation to dealers $149,916; compensation to sales
personnel $891,327; seminars and meetings $37,479; travel and
entertainment,$71,060; general and administrative, $510,305; telephone, $25,922;
and occupancy and equipment rental, $75,038.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Growth Fund: advertising
$426; printing and mailing of prospectuses to persons other than current
shareholders, $793; compensation to dealers $27,491; compensation to sales
personnel $13,520; seminars and meetings $6,873; travel, and entertainment,
$1,080; general and administrative, $7,742; telephone, $393; and occupancy and
equipment rental, $1,134.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Growth Fund: advertising
$16; printing and mailing of prospectuses to persons other than current
shareholders, $32; compensation to dealers $0; compensation to sales personnel
$187; seminars and meetings $0; travel and entertainment, $15; general and
administrative, $107; telephone, $6; and occupancy and equipment rental, $16.
During the fiscal year ended December 31, 1998, Ivy Growth with Income
Fund paid IMDI $139,711 pursuant to its Class A plan. During the fiscal year
ended December 31, 1998, Ivy Growth with Income Fund paid IMDI $224,258 pursuant
to its Class B plan. During the fiscal year ended December 31, 1998, Ivy Growth
with Income Fund paid IMDI $29,800 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Growth with Income Fund:
advertising $6,094; printing and mailing of prospectuses to persons other than
current shareholders, $13,170 compensation to dealers $32,346; compensation to
sales personnel, $192,402; seminars and meetings, $8,087; travel and
entertainment, $15,341; general and administrative, $110,099; telephone, $5,589
and occupancy and equipment rental, $16,163.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Growth with Income Fund:
advertising, $2,020; printing and mailing of prospectuses to persons other than
current shareholders, $4,302; compensation to dealers, $142,522; compensation to
sales personnel, $63,776; seminars and meetings, $35,630; travel and
entertainment, $5,093; general and administrative, $36,441; telephone, $1,845;
and occupancy and equipment rental $5,307.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Growth with Income Fund:
advertising, $265; printing and mailing of prospectuses to persons other than
current shareholders, $549; compensation to dealers, $77,858; compensation to
sales personnel, $7,814; seminars and meetings, $1,965; travel and
entertainment, $616; general administrative, $4,396; telephone, $220; and
occupancy and equipment rental, $632.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund
paid IMDI $168 pursuant to its Class A plan. During the fiscal year ended
December 31, 1998, Ivy US Blue Chip Fund paid IMDI $654 pursuant to its Class B
plan. During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund paid
IMDI $88 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy US Blue Chip Fund:
advertising $51; printing and mailing of prospectuses to persons other than
current shareholders, $16,058; compensation to dealers, $216; compensation to
sales personnel $1,749; seminars and meetings, $54; travel and entertainment,
$142; general and administrative, $1,010; telephone, $52; and occupancy and
equipment rental, $143.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy US Blue Chip Fund:
advertising, $60; printing and mailing of prospectuses to persons other than
current shareholders, $18,816; compensation to dealers, $4,697; compensation to
sales personnel, $2,049; seminars and meetings, $1,174; travel and
entertainment, $168; general and administrative, $1,183; telephone, $60; and
occupancy and equipment rental $168.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy US Blue Chip Fund:
advertising, $7; printing and mailing of prospectuses to persons other than
current shareholders, $2,319; compensation to dealers, $269; compensation to
sales personnel, $252; seminars and meetings, $68; travel and entertainment,
$21; general administrative, $145; telephone, $7; and occupancy and equipment
rental, $21.
During the fiscal year ended December 31, 1998, Ivy US Emerging Growth
Fund paid IMDI $146,886 pursuant to its Class A plan. During the fiscal year
ended December 31, 1998, Ivy US Emerging Growth Fund paid IMDI $460,204 pursuant
to its Class B plan. During the fiscal year ended December 31, 1998, Ivy US
Emerging Growth Fund paid IMDI $92,289 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy US Emerging Growth Fund:
advertising $5,379; printing and mailing of prospectuses to persons other than
current shareholders, $26,210; compensation to dealers, $28,682; compensation to
sales personnel $169,532; seminars and meetings, $7,171; travel and
entertainment, $13,500; general and administrative, $97,045; telephone, $4,930;
and occupancy and equipment rental, $14,300.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy US Emerging Growth Fund:
advertising, $4,253; printing and mailing of prospectuses to persons other than
current shareholders, $20,900; compensation to dealers, $295,137; compensation
to sales personnel, $134,449; seminars and meetings, $73,784; travel and
entertainment, $10,726; general and administrative, $76,937; telephone, $3,904;
and occupancy and equipment rental $11,281.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy US Emerging Growth Fund:
advertising, $836; printing and mailing of prospectuses to persons other than
current shareholders, $4,087; compensation to dealers, $35,132; compensation to
sales personnel, $26,384; seminars and meetings, $8,784; travel and
entertainment, $2,104; general administrative, $15,090; telephone, $766; and
occupancy and equipment rental, $2,213.
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 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 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, MIMI provides certain
accounting and pricing services for each Fund. 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 each 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.
During the fiscal year ended December 31, 1998, Ivy Growth Fund paid
MIMI $106,712 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Growth with Income
Fund paid MIMI $94,539 under the agreement.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund
paid MIMI $1,654 under the agreement.
During the fiscal year ended December 31, 1998, Ivy US Emerging Growth
Fund paid MIMI $98,957 under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("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 for each open Class A, Class B, Class C and 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. Ivy US
Blue Chip Fund pays a monthly fee at an annual rate of $10.25 per open Class I
account. Such fees and expenses for the fiscal year ended December 31, 1998 for
Ivy Growth Fund totaled $755,710. Such fees and expenses for the fiscal year
ended December 31, 1998 for Ivy Growth with Income Fund totaled $235,695. Such
fees and expenses for the fiscal year ended December 31, 1998 for Ivy US Blue
Chip Fund totaled $184. Such fees and expenses for the fiscal year ended
December 31, 1998 for Ivy US Emerging Growth Fund totaled $314,453. Certain
broker-dealers that maintain shareholder accounts with each 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., 0.10%) 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 0.10% of the
Fund's average daily net assets with respect to Class A, Class B, Class C and
Advisor Class shares. Ivy US Blue Chip fund pays MIMI a monthly fee at the
annual rate of 0.01% of its average daily net assets for Class I. Such fees for
the fiscal year ended December 31, 1998 for Ivy Growth Fund totaled $320,272.
Such fees for the fiscal year ended December 31, 1998 for Ivy Growth with Income
Fund totaled $93,648. Such fees for the fiscal year ended December 31, 1998 for
Ivy US Blue Chip Fund totaled $225. Such fees for the fiscal year ended December
31, 1998 for Ivy US Emerging Growth Fund totaled $115,978.
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
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 any 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 the Funds 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, 1996, 1997 and 1998, Ivy
Growth Fund paid brokerage commissions of $883,583, $683,881 and $907,345,
respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth with Income Fund paid brokerage commissions of $293,827, $155,283 and
$378,887, respectively.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund
paid brokerage commissions of $1,806.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy US
Emerging Growth Fund paid brokerage commissions of $426,676, $583,738 and
$658,613, respectively.
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 deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each 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
each Fund, and each Fund's 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.
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 any 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 nineteen 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 the Funds, Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities Fund, Ivy Global Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, Ivy
Pan-Europe Fund, and Ivy South America Fund, as well as Class I shares for Ivy
Bond Fund, Ivy European Opportunities Fund, Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Fund II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund and Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities 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
International Strategic Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund,
and Ivy South America Fund, (the other fifteen series of the Trust). (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 all classes of shares. 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 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 other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a 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).
Each Fund may, from time to time, waive the initial sales charge on
its Class A shares sold to clients of The Legend Group and United Planners
Financial Services of America, Inc. This privilege will apply only to Class A
Shares of a Fund that are purchased using all or a portion of the proceeds
obtained by such clients through redemptions of shares of a mutual fund (other
than one of the Funds) on which a sales charge was paid (the "NAV transfer
privilege"). Purchases eligible for the NAV transfer privilege must be made
within 60 days of redemption from the other fund, and the Class A shares
purchased are subject to a 1.00% CDSC on shares redeemed within the first year
after purchase. The NAV transfer privilege also applies to Fund shares purchased
directly by clients of such dealers as long as their accounts are linked to the
dealer's master account. The normal service fee, as described in the "Initial
Sales Charge Alternative - Class A Shares" section of the Prospectus, will be
paid to those dealers in connection with these purchases. IMDI may from time to
time pay a special cash incentive to The Legend Group or United Planners
Financial Services of America, Inc. in connection with sales of shares of a Fund
by its registered representatives under the NAV transfer privilege. Additional
information on sales charge reductions or waivers may be obtained from IMDI at
the address listed on the cover of this Statement of Additional Information.
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 any
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 any 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 any 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund, and Ivy US Emerging Growth Fund.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter s0%
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 1.00% 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 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. No exchange out of any
Fund (other than by a complete exchange of all Fund shares) may be made if it
would reduce the shareholder's interest in that Fund to less than $1,000.
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.
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 any 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 Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities 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 International Strategic Bond Fund, Ivy
Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth 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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
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
same 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 each 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 such funds
(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 all funds other than Ivy Bond
Fund; or $100,000 or more for Ivy Bond 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 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 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 each 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 each 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 any 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.
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.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in any 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 any 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 that 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 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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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. Each Fund's liabilities, if not identifiable as belonging to
a particular class of that 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), 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 a Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
normally invests in securities that are listed on foreign exchanges that may
trade on weekends or other days when the Fund does not price its shares, each
Fund's net asset value may change on days when shareholders will not be able to
purchase or redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 each 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 a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by any Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each 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 each 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 each Fund accrues receivables or liabilities denominated
in a foreign currency and the time that 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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, that 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. Each 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.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each 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, each 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 each 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 each 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. Each 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 each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each 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 each Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by that 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 the same 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 each 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 any Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and may elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the 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 the 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 the
Fund's income flows through to its shareholders. With respect to each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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.
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 the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the 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 each Fund, it is assumed that
all dividends and capital gains distributions made by the 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
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 each Fund 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%.
Each 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 table summarizes the calculation of Standardized and
Non-Standardized Return for the Class A, Class B and Class C shares of each Fund
for the periods indicated. In determining the average annual total return for a
specific class of shares of each 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 each 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 Fund.
IVY GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 1998 7.50% 7.99% 11.72%
Five Years ended December 31, 11.70% 11.70% N/A
1998
Ten Years ended December 31, 12.65% N/A N/A
1998
Inception [#] to year ended 10.86% 11.88% 10.67%
December 31, 1998 [7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 1998 14.05% 12.99% 12.72%
Five Years ended December 31, 13.03% 11.96% N/A
1998
Ten Years ended December 31, 13.31% N/A N/A
1998
Inception [#] to year ended 11.04% 11.98% 10.67%
December 31, 1998 [7]:
- ------------------------------- ---------------------- ------------------ ----
[*] 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 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 Class A shares of Ivy Growth Fund was March
1, 1984. The inception dates for Class B and Class C shares of the Fund were
October 23, 1993 and April 30, 1996, respectively.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one,
five and ten year periods ended December 31, 1998 would have been 10.86%, 7.50%,
11.68% and 12.62%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one and
five year periods ended December 31, 1998 would have been 11.83%, 7.99%, and
11.69%, respectively. (Since the inception date for Class B shares was October
23, 1993, there were no Class B shares outstanding for the duration of the
ten-year period ended December 31, 1998.)
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been 10.67% and 11.72%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no Class C shares outstanding for the duration of the five and ten
year periods ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one, five and ten year periods ended December 31, 1998 would have been 11.03%,
14.05%, 13.02%, and 13.28%, 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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 11.95%,
12.99%, and 11.95%, respectively. (Since the inception date for Class B shares
was October 23, 1993, there were no Class B shares outstanding for the duration
of the ten-year period ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one year period ended December 31, 1998 would have been 10.67% and 12.72%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no Class C shares outstanding for the duration of the five and ten
year periods ended December 31, 1998.)
[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]
Year ended December 31, 1998 3.53% 4.01% 8.16%
Five years ended December 13.16% 13.39% N/A
31, 1998
Ten years ended December 13.41% N/A N/A
31, 1998:
Inception [#] to year ended 15.06% 13.12% 15.82%
December 31, 1998 [7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 9.64% 9.01% 9.16%
1998:
Five years ended December 14.51% 13.63% N/A
31, 1998
Ten years ended December 14.09% N/A N/A
31, 1998:
Inception [#] to year ended 15.53% 13.22% 15.82%
December 31, 1998 [7]:
- ----------------------------- -------------------- ---------------------- -----
[*] 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 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 (Class A shares)
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 was 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 the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one,
five and ten year periods ended December 31, 1998 would have been 15.06%, 3.53%,
13.16%, and 13.40%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one and
five year periods ended December 31, 1998 would have been 13.12%, 4.01%, and
13.39%, respectively. (Since the inception date for Class B shares was October
23, 1993, there were no outstanding Class B shares during the duration of the
ten year period ended December 31, 1998.)
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been 15.82% and 8.16%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares during the five and ten year periods
ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one, five and ten year periods ended December 31, 1998 would have been 15.52%,
9.84%, 14.51%, and 14.07%, 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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 13.22%, 9.01%,
and 13.63%, respectively. (Since the inception date for Class B shares was
October 23, 1993, there were no outstanding Class B shares during the duration
of the ten year period ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one year period ended December 31, 1998 would have been 15.82%, and 9.16%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares during the five and ten year periods
ended December 31, 1998.)
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
<TABLE>
<CAPTION>
IVY US BLUE CHIP FUND
STANDARDIZED RETURN[*]
<S> <C> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I [4]
Inception [#] to year ended December 1.22% (0.92)% 3.08% N/A
31, 1998 [8]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I [4]
Inception [#] to year ended December 7.40% 4.08% 4.08% N/A
31, 1998 [8]:
- --------------------------------------- ------------------ ------------------ ------------------ -----------------------
</TABLE>
[*] 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 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 Blue Chip Fund was November 2, 1998.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1998 would
have been 0.35%.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1998 would
have been (1.79)%.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the period from inception through December 31, 1998 would
have been 2.22%.
[4] Class I Shares are not subject to an initial sales charge or a
CDSC; therefore, the Standardized and Non-Standardized Return figures would be
identical. However, there were no outstanding Class I Shares during the period
indicated.
[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 period from inception through December 31,
1998 would have been 6.49%.
[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 period from inception through December 31,
1998 would have been 3.19%.
[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 period from inception through December 31,
1998 would have been 3.22%.
[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]
Year ended December 31, 11.21% 12.13% 16.19%
1998
Five years ended 15.06% 15.35% N/A
December 31, 1998
Inception [#] to year 20.88% 14.85% 5.69%
ended December 31, 1998
[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 18.00% 17.13% 17.19%
1998
Five years ended 16.43% 15.58% N/A
December 31, 1998
Inception [#] to year 22.13% 14.94% 5.69%
ended December 31, 1998
[7]:
- ---------------------------- -------------------- -------------------
[*] 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 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 the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one and
five year periods ended December 31, 1998 would have been 20.86%, 11.21% and
15.06%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one and
five year periods ended December 31, 1998 would have been 14.81%, 12.13%, and
15.35%, respectively.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been 5.69% and 16.19%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares for the duration of the five year
period ended December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 22.13%,
18.00%, and 16.43%, 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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 14.90%,
17.13%, and 15.58%, 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 period from inception through December 31, 1998 and the
one year period ended December 31, 1998 would have been 5.69% and 17.19%,
respectively. (Since the inception date for Class C shares was April 30, 1996,
there were no outstanding Class C shares for the duration of the five year
period ended December 31, 1998.)
[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 each Fund for a specified period. Cumulative total return quotations
reflect changes in the price of each Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the same
Fund's shares. Cumulative total return is calculated by computing the cumulative
rates of return of a hypothetical investment in a specific class of shares of
each 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 GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth Fund for the periods indicated through December 31, 1998,
assuming the maximum 5.75% sales charge has been assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A 7.50% 73.89% 228.95% 4576.57%
Class B 7.99% N/A N/A 79.02%
Class C 11.72% N/A N/A 31.11%
</TABLE>
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth Fund for the periods indicated through December 31, 1998,
assuming the maximum 5.75% sales charge has not been assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A 14.05% 84.50% 249.02% 4861.88%
Class B 12.99% N/A N/A 80.02%
Class C 12.72% N/A N/A 31.11%
- ---------------------------
</TABLE>
[*] The inception date for Ivy Growth Fund (Class A shares) 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.
IVY GROWTH WITH INCOME FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth with Income Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has been assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A 9.84% 85.57% 252.08% 684.55%
Class B 4.01% 87.47% N/A 89.62%
Class C 8.16% N/A N/A 48.05%
</TABLE>
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth with Income Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has not been
assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A 3.53% 96.89% 273.56% 732.43%
Class B 9.01% 89.47% N/A 90.62%
Class C 9.16% N/A N/A 48.05%
</TABLE>
[*] The inception date for Ivy Growth with Income Fund (Class A shares) 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.
IVY US BLUE CHIP FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Blue Chip Fund for the periods indicated through December 31,
1998, assuming the maximum 5.75% sales charge has been assessed.
SINCE INCEPTION[*]
Class A 1.22%
Class B (0.92)%
Class C 3.08%
Class I N/A
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Blue Chip Fund for the periods indicated through December 31,
1998, assuming the maximum 5.75% sales charge has not been assessed.
SINCE INCEPTION[*]
Class A 7.40%
Class B 4.08%
Class C 4.08%
Class I N/A
- ---------------------------
[*] The inception date for Ivy US Blue Chip Fund was November 2, 1998.
IVY US EMERGING GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Emerging Growth Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 11.21% 101.66% 193.08%
Class B 12.13% 104.26% 105.16%
Class C 16.19% N/A 15.94%
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Emerging Growth Fund for the periods indicated through
December 31, 1998, assuming the maximum 5.75% sales charge has not been
assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 18.00% 113.96% 210.96%
Class B 17.13% 106.26% 106.16%
Class C 17.19% N/A 15.94%
- ---------------------------
[*] 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 were first offered for sale to the
public on October 23, 1993. The inception date for Class C shares was
April 30, 1996.
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 each 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 each 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's Portfolio of Investments as of December 31, 1998, Statement
of Assets and Liabilities as of December 31, 1998, Statement of Operations for
the fiscal year ended December 31, 1998, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1998, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in the Fund's December 31, 1998 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY US BLUE CHIP 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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Advisor Class shares of Ivy Growth Fund, Ivy Growth with Income Fund, Ivy US
Blue Chip Fund and Ivy US Emerging Growth Fund (each a "Fund"). The other
fifteen portfolios of the Trust are described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Funds' Advisor Class shares dated May 3, 1999 (the
"Prospectus"), which may be obtained upon request and without charge from the
Trust at the Distributor's address and telephone number printed below. Advisor
Class shares are only offered to certain investors (see the Prospectus). The
Funds also offer Class A, B and C shares (and Class I shares, in the case of Ivy
US Blue Chip 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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION..........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..................................1
IVY GROWTH FUND.....................................................1
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND.........................2
IVY GROWTH WITH INCOME FUND.........................................4
INVESTMENT RESTRICTIONS FOR IVY GROWTH WITH INCOME FUND.............5
IVY US BLUE CHIP FUND...............................................6
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND...................7
IVY US EMERGING GROWTH FUND.........................................9
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND............10
COMMON STOCKS......................................................12
CONVERTIBLE SECURITIES.............................................12
SMALL COMPANIES....................................................13
ADJUSTABLE RATE PREFERRED STOCKS...................................13
DEBT SECURITIES....................................................13
IN GENERAL................................................13
INVESTMENT-GRADE DEBT SECURITIES..........................14
LOW-RATED DEBT SECURITIES.................................14
U.S. GOVERNMENT SECURITIES................................15
ZERO COUPON BONDS.........................................16
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES...16
ILLIQUID SECURITIES................................................16
FOREIGN SECURITIES.................................................17
EMERGING MARKETS...................................................18
FOREIGN CURRENCIES.................................................19
FOREIGN CURRENCY EXCHANGE TRANSACTIONS.............................20
REPURCHASE AGREEMENTS..............................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS..................21
COMMERCIAL PAPER...................................................21
BORROWING..........................................................22
WARRANTS...........................................................22
REAL ESTATE INVESTMENT TRUSTS (REITS)..............................22
OPTIONS TRANSACTIONS...............................................22
IN GENERAL................................................22
WRITING OPTIONS ON INDIVIDUAL SECURITIES..................23
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES...............24
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES......24
RISKS OF OPTIONS TRANSACTIONS.............................25
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.................26
IN GENERAL................................................26
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS.........27
SECURITIES INDEX FUTURES CONTRACTS.................................28
RISKS OF SECURITIES INDEX FUTURES.........................28
COMBINED TRANSACTIONS.....................................29
PORTFOLIO TURNOVER..........................................................30
TRUSTEES AND OFFICERS.......................................................30
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI..................30
INVESTMENT ADVISORY AND OTHER SERVICES......................................30
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES...............30
DISTRIBUTION SERVICES..............................................32
RULE 18F-3 PLAN...........................................33
CUSTODIAN..........................................................33
FUND ACCOUNTING SERVICES...........................................33
TRANSFER AGENT AND DIVIDEND PAYING AGENT...........................34
ADMINISTRATOR......................................................34
AUDITORS...........................................................34
BROKERAGE ALLOCATION........................................................34
CAPITALIZATION AND VOTING RIGHTS............................................35
SPECIAL RIGHTS AND PRIVILEGES...............................................37
AUTOMATIC INVESTMENT METHOD........................................37
EXCHANGE OF SHARES.................................................37
RETIREMENT PLANS...................................................38
INDIVIDUAL RETIREMENT ACCOUNTS............................38
ROTH IRAS.................................................40
QUALIFIED PLANS...........................................40
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT").....................41
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS..................41
SIMPLE PLANS..............................................41
SYSTEMATIC WITHDRAWAL PLAN.........................................42
GROUP SYSTEMATIC INVESTMENT PROGRAM................................42
REDEMPTIONS.................................................................42
NET ASSET VALUE.............................................................43
TAXATION 45
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS............46
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES.............47
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES.................47
DEBT SECURITIES ACQUIRED AT A DISCOUNT.............................47
DISTRIBUTIONS......................................................48
DISPOSITION OF SHARES..............................................49
FOREIGN WITHHOLDING TAXES..........................................49
BACKUP WITHHOLDING.................................................50
PERFORMANCE INFORMATION.....................................................50
AVERAGE ANNUAL TOTAL RETURN...............................51
CUMULATIVE TOTAL RETURN...................................52
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION.....52
FINANCIAL STATEMENTS........................................................53
APPENDIX A..................................................................54
<PAGE>
GENERAL INFORMATION
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. Ivy Growth Fund commenced operations on
March 1, 1984. Ivy Growth with Income Fund commenced operations on April 1,
1984. Ivy US Blue Chip Fund commenced operations on November 2, 1998. Ivy US
Emerging Growth Fund commenced operations on March 3, 1993. Advisor Class shares
of each Fund (except Ivy US Blue Chip Fund) were first offered on January 1,
1998. Advisor Class shares of Ivy US Blue Chip Fund were first offered on
November 2, 1998.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on that Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
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 each 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.
IVY GROWTH FUND
Ivy Growth Fund's principal investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund invests at
least 65% of its total assets in common stocks and securities convertible into
common stocks. The Fund invests 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 Growth Fund may invest up to 25% of its 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, the 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, 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.
The Fund may 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, 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 a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts
and may also invest in equity real estate investment trusts.
Ivy Growth Fund 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. The 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, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, Ivy Growth 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) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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;
(x) 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);
(xi) 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); or
(xii)purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidation;
Under the 1940 Act, the Fund is permitted, subject to its 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 (vii) 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.
ADDITIONAL RESTRICTIONS
Ivy Growth 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) 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;
(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;
(v) 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 (included predecessors) less than three years
old; or
(vi) invest more than 5% of the value of its total assets in the securities
of issuers which are not readily marketable.
IVY GROWTH WITH INCOME FUND
Ivy Growth with Income Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. The Fund has some emphasis on
dividend-paying stocks. Under normal conditions, the Fund invests at least 65%
of its total assets in common stocks and securities convertible into common
stocks. The Fund invests 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 Growth with Income Fund may invest up to 25% of its 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, the 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, 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.
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 a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts.
The Fund may also invest in equity real estate investment trusts.
The Fund 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. The 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, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH WITH INCOME FUND
Ivy Growth with Income Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
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) 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;
(vii) purchase or sell real estate or commodities and commodity contracts;
(viii) 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;
(ix) 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;
(x) 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);
(xi) hold more than 10% of the voting securities of an one issuer (except
obligations of domestic banks or the U.S. Government, it agencies,
authorities and instrumentalities); or
(xii)purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidation.
Under the 1940 Act, the Fund is permitted, subject to the above
investment restrictions, to borrow money only from banks. The Trust has not
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (vii) 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.
ADDITIONAL RESTRICTIONS
Ivy Growth with Income 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) engage in the purchase and sale of puts, calls, straddles or spreads
(except of the extent described in the Prospectus and in this SAI);
(iii)invest in companies for the purpose of exercising control of
management;
(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;
(v) 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; or
(vi) invest more than 5% of the value of its total assets in the securities
of issuers which are not readily marketable.
IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund will invest
at least 65% of its total assets in the common stocks of companies determined by
IMI to be "Blue Chip." Generally, the median market capitalization of companies
targeted for investment by the Fund will be greater than $5 billion. For
investment purposes, however, Blue Chip companies are those companies whose
market capitalization is greater than $1 billion at the time of investment.
Blue Chip companies are those which occupy (or in IMI's judgment have
the potential to occupy) leading market positions that are expected to be
maintained or enhanced over time. Such companies tend to have a lengthy history
of profit growth and dividend payment, and a reputation for quality management
structure, products and services. Securities of Blue Chip companies generally
are considered to be highly liquid because, compared to those of
lesser-capitalized companies, more shares of these securities are outstanding in
the marketplace and their trading volume tends to be higher.
When circumstances warrant, Ivy US Blue Chip 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 Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's Corporation ("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.
As a fundamental policy, Ivy US Blue Chip Fund may borrow up to 10% of
the value of its total assets, for temporary purposes when it would be
advantageous to do so from an investment standpoint. The Fund may invest up to
5% of its net assets in warrants. The Fund may not invest more than 15% of its
net assets in illiquid securities. The Fund may also invest in equity real
estate investment trusts ("REITs").
The Fund may write put options on securities and stock indices, with
respect to not more than 10% of the value of its net assets, and may write
covered call options with respect to not more than 25% of the value of its net
assets. The Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its total assets. For hedging purposes
only, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip 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 the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. Under these restrictions, the Fund
may not:
(i) invest in real estate, real estate mortgage loans, commodities and
commodity futures contracts although the 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) interest rate and
other financial futures contracts and related options;
(ii) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions; the deposit or payment by
the Fund of initial or variation margins in connection with futures
contracts or related options transactions is not considered the
purchase of a security 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 shares;
(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 shares 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;
(vi) invest 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 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;
(ix) borrow amounts in excess of 10% of its total assets, taken at the
lower of cost or market value, as a temporary measure for
extraordinary or emergency purposes or where investment transactions
might advantageously require it; or except in connection with reverse
repurchase agreements, provided that the Fund maintains net asset
coverage of at least 300% for all borrowings;
(x) purchase securities of any one issuer (except obligations of domestic
banks or the U.S. Government, its agencies, authorities and
instrumentalities) 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; or
(xi) 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 set forth in Section
12(d)(1) of the 1940 Act and (viii) of Additional Restrictions, below.
Under the 1940 Act, the Fund is permitted, subject to the Fund's
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 (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.
ADDITIONAL RESTRICTIONS
Ivy US Blue Chip 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) 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;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii)engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies for the purpose of exercising control of
management;
(v) 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;
(vi) purchase or retain securities of any company if officers and Trustees
of the Trust and officers and directors of IMI, 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;
(vii)invest more than 15% of its net assets 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 the 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 such instrument that, due to the existence of a
trading market or to other factors, is liquid; or
(viii) acquire any securities of registered open-end investment companies
or registered unit investment trusts in reliance on subparagraphs (f)
and (g) of Section 12(d)(1) of the 1940 Act.
IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. Under normal conditions, the
Fund invests at least 65% of its total assets in common stocks and securities
convertible into common stocks. The 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.
Ivy US Emerging Growth Fund may invest up to 25% of its 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, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated as 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.
As a fundamental policy, the 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. The Fund may invest up to 5% of its net
assets in warrants. The Fund may not invest more than 15% of its net assets in
illiquid securities. The Fund may enter into forward foreign currency contracts.
Ivy US Emerging Growth Fund 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. The 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, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, 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 of the outstanding voting shares of the Fund.
Under these restrictions, the 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) 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;
(ix) 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;
or
(x) 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, the Fund is permitted, subject to its 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 (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.
ADDITIONAL RESTRICTIONS
Ivy US Emerging Growth 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) 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;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii)engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies for the purpose of exercising control of
management; or
(v) 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;
(vi) 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;
(vii)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; or
(viii) 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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each 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. 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.
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. 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.
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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). The Funds
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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which that Fund could sell such securities,
and cause large fluctuations in the daily net asset value of that 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 each 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. 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.
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.
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.
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
representing 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 a 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. Ivy US Blue Chip 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, Ivy US
Blue Chip 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.
ILLIQUID SECURITIES
Each 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 each 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 that
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).
FOREIGN SECURITIES
The securities of foreign issuers in which Ivy Growth Fund, Ivy Growth
with Income Fund, and Ivy US Emerging Growth Fund may invest include non-U.S.
dollar-denominated debt securities, Euro dollar securities, sponsored and
unsponsored American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs"), Global Depository Shares ("GDSs")
and related depository instruments, 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 each Fund's
domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 each 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
EMERGING MARKETS
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth 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 each 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 each 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 each 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 each 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, each 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
each 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. Moreover, Ivy Growth Fund, Ivy Growth with Income Fund, and
Ivy US Emerging Growth Fund may 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 each 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 each Fund may incur costs in connection with conversions
between various currencies. Although each Fund's custodian values the Fund's
assets daily in terms of U.S. dollars, each Fund does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. Each 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. Each 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 Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US
Emerging Growth Fund normally will be invested in both U.S. and foreign
securities markets, changes in these Funds' share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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. Foreign currencies
in which each Fund's assets are denominated may be devalued against the U.S.
dollar, resulting in a loss to the Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each 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 the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may purchase currency forwards and combine such purchases with
sufficient cash or short-term securities to create unleveraged substitutes for
investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Ivy Growth Fund, Ivy Growth with Income Fund, and Ivy US Emerging
Growth Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk. 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.
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 Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Growth Fund, Ivy Growth with Income Fund, or Ivy US Blue
Chip 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.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, a Fund
would need to negotiate directly with the counterparty.
Each 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 any Fund, are taxable as ordinary income. See "Taxation."
Each 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 the 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 the 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 each 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, the 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. Each 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. Each 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 each Fund, each 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 "covered" call option means generally that so long as a 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each 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. Each 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.
Each 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 the 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 any Fund for leverage purposes.
Each 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, the 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. Each 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. Call
options on indices are similar to call 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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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, the 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. 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. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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) 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 each 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any 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 a
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
Each Fund may enter into securities index futures contracts as an
efficient means of regulating that Fund's exposure to the equity markets. Each
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, the 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. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each 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 a 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, a 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.
Each 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. Each
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, each Fund will maintain 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 an index futures contract, each Fund will maintain with
its Custodian (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
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. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options and currency 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 the 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.
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, each
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 the 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.
Each 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.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 Funds. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory services to
the Fund pursuant to a Business Management and Investment Advisory Agreement
(the "Agreement"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund,
Ivy Developing Nations Fund, Ivy European Opportunities Fund, Ivy Global Fund,
Ivy Global Science & Technology Fund, Ivy International Fund, Ivy International
Fund II, Ivy International Small Companies Fund, Ivy International Strategic
Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund, and Ivy South America
Fund. IMI also provides business management services to Ivy Global Natural
Resources Fund.
The Agreement obligates IMI to make investments for the account 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 each 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 each Fund's Custodian and
monitor the services it provides to each 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 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 each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
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 Growth Fund Pays IMI a monthly fee for providing business
management and investment advisory services that is equal, on an annual basis,
to 0.85% of the first $350 million of the Fund's average net assets reduced to
0.75% on its average net assets in excess of $350 million.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth Fund paid IMI fees of $2,608,378, $2,794,304 and $2,722,314,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $12,486, $0 and $0, respectively.
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 Fund's average net assets.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth with Income Fund paid IMI fees of $629,322, $624,013 and $702,361,
respectively.
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund each pays IMI a
monthly fee for providing business management and investment advisory services
at an annual rate of 1.00% of the Fund's average net assets.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip
Fund paid IMI fees of $1,687. During the fiscal year ended December 31, 1998,
IMI reimbursed Fund expenses in the amount of $11,052.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy US
Emerging Growth Fund paid IMI fees of $657,579, $973,756 and $985,816,
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 each 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
each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, 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 each 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) with respect to any Fund is presented to the shareholders,
continuance (or adoption) shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
The Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on the Fund's behalf. The Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at the Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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.
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 each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by the 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. The 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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 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, MIMI provides certain
accounting and pricing services for each Fund. 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 each 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.
During the fiscal year ended December 31, 1998, Ivy Growth Fund paid
MIMI $106,712 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Growth with
Income Fund paid MIMI $94,539 under the agreement.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund
paid MIMI $1,654 under the agreement.
During the fiscal year ended December 31, 1998, Ivy US Emerging Growth
Fund paid MIMI $98,957 under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("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 for each open Class A, Class B, Class C and 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. Ivy US
Blue Chip Fund pays a monthly fee at an annual rate of $10.25 per open Class I
account. Such fees and expenses for the fiscal year ended December 31, 1998 for
Ivy Growth Fund totaled $755,710. Such fees and expenses for the fiscal year
ended December 31, 1998 for Ivy Growth with Income Fund totaled $235,695. Such
fees and expenses for the fiscal year ended December 31, 1998 for Ivy US Blue
Chip Fund totaled $184. Such fees and expenses for the fiscal year ended
December 31, 1998 for Ivy US Emerging Growth Fund totaled $314,453. Certain
broker-dealers that maintain shareholder accounts with each 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., 0.10%) 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 0.10% of the
Fund's average daily net asset value of its Class A, Class B, Class C, and
Advisor Class shares. Ivy US Blue Chip Fund pays MIMI a monthly fee at the
annual rate of 0.01% of its average daily net assets for Class I. Such fees for
the fiscal year ended December 31, 1998 for Ivy Growth Fund totaled $320,272.
Such fees for the fiscal year ended December 31, 1998 for Ivy Growth with Income
Fund totaled $93,648. Such fees for the fiscal year ended December 31, 1998 for
Ivy US Blue Chip Fund totaled $225. Such fees for the fiscal year ended December
31, 1998 for Ivy US Emerging Growth Fund totaled $115,978.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 any 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 the Funds 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, 1996, 1997 and 1998, Ivy
Growth Fund paid brokerage commissions of $883,583, $683,881 and 907,345,
respectively.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy
Growth with Income Fund paid brokerage commissions of $293,827, $155,283 and
$378,887, respectively.
During the fiscal year ended December 31, 1998, Ivy US Blue Chip Fund paid
brokerage commissions of $1,806.
During the fiscal years ended December 31, 1996, 1997 and 1998, Ivy US
Emerging Growth Fund paid brokerage commissions of $426,676, $583,738 and
$658,613, respectively.
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 deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each 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
each Fund, and each Fund's 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.
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 any 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 nineteen 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 the Funds, Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities Fund, Ivy Global Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund, Ivy
Pan-Europe Fund, and Ivy South America Fund, as well as Class I shares for Ivy
Bond Fund, Ivy European Opportunities Fund, Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Fund II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund and Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 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.
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.
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 any 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities 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
International Strategic Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund,
and Ivy South America Fund, (the other fifteen series of the Trust). (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 all classes of shares. 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 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 other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a Fund 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 share. The minimum value of Advisor Class shares which may
be exchanged into an Ivy fund in which shares are not already held is $10,000.
No exchange out of any 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 that Fund to less than $10,000.
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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
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. 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 $250 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 of each 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.
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.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in any 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 any 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.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that 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. Each Fund's liabilities, if not identifiable as belonging to
a particular class of that 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), 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 a Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
normally invests in securities that are listed on foreign exchanges that may
trade on weekends or other days when the Fund does not price its shares, each
Fund's net asset value may change on days when shareholders will not be able to
purchase or redeem that Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 each 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 a 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 each 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 each 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 each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each 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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by any Fund, which is taxed as ordinary income when
distributed to shareholders.
Each 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, each 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 each 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 each Fund accrues receivables or liabilities denominated
in a foreign currency and the time that 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 each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each 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, that 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. Each 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.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each 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, each 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 each 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 each 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. Each 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 each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each 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 each Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by that 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 each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains 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 that 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, will be long-term or
short-term, 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 the same 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 each 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 any Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and may elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the 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 the 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 the
Fund's income flows through to its shareholders. With respect to each 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 each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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.
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 the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the 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 each Fund, it is assumed that
all dividends and capital gains distributions made by the Fund are reinvested at
net asset value in additional Advisor Class shares during the designated period.
Standardized Return quotations for each Fund 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%.
Each 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").
In determining the average annual total return for a specific class of
shares of each 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 each 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 Fund.
The Standardized Return for the Advisor Class shares of Ivy Growth
Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (0.14)%.
The Standardized Return for the Advisor Class shares of Ivy Growth with
Income Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (0.36)%.
The Standardized Return for the Advisor Class shares of Ivy US Blue
Chip Fund for the period from the date Advisor Class shares were first offered
(November 2, 1998) through December 31, 1998 was 7.40%. This figure reflects
expense reimbursement. Without expense reimbursement, the Standardized Return
would have been 6.50%.
The Standardized Return for the Advisor Class shares of Ivy US Emerging
Growth Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was 13.78%.
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 each Fund for a specified period. Cumulative total return quotations
reflect changes in the price of each Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the same
Fund's shares. Cumulative total return is calculated by computing the cumulative
rates of return of a hypothetical investment in a specific class of shares of
each 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.
The Cumulative Total Return for the Advisor Class shares of Ivy
Growth Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through December 31, 1998 was (0.14)%.
The Cumulative Total Return for the Advisor Class shares of Ivy Growth
with Income Fund for the period from the date Advisor Class shares were first
offered (January 1, 1998) through December 31, 1998 was (0.36)%.
The Cumulative Total Return for the Advisor Class shares of Ivy US Blue
Chip Fund for the period from the date Advisor Class shares were first offered
(November 2, 1998) through December 31, 1998 was 7.40%.
The Cumulative Total Return for the Advisor Class shares of Ivy US
Emerging Growth Fund for the period from the date Advisor Class shares were
first offered (January 1, 1998) through December 31, 1998 was 13.78%.
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 each 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 each 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 each Fund's shares and the risks associated with each 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.
Each 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
Each Fund's Portfolio of Investments as of December 31, 1998, Statement
of Assets and Liabilities as of December 31, 1998, Statement of Operations for
the fiscal year ended December 31, 1998, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1998, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1998 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
IVY BOND FUND
IVY INTERNATIONAL STRATEGIC BOND FUND
IVY MONEY MARKET FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B and C shares of Ivy Money Market Fund and the Class A, B, C and I
shares of Ivy Bond Fund and Ivy International Strategic Bond Fund (each a
"Fund"). The other sixteen portfolios of the Trust are described in separate
prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Funds dated May 3, 1999 (the "Prospectus"), which may
be obtained upon request and without charge from the Trust at the Distributor's
address and telephone number printed below. Ivy Bond Fund and Ivy International
Strategic Bond 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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION.........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................1
IVY BOND FUND......................................................1
INVESTMENT RESTRICTIONS FOR IVY BOND FUND..........................2
IVY INTERNATIONAL STRATEGIC BOND FUND..............................5
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL STRATEGIC BOND FUND..7
IVY MONEY MARKET FUND.............................................10
INVESTMENT RESTRICTIONS FOR IVY MONEY MARKET FUND.................11
COMMON STOCKS.....................................................13
CONVERTIBLE SECURITIES............................................14
DEBT SECURITIES...................................................14
IN GENERAL...............................................14
INVESTMENT-GRADE DEBT SECURITIES.........................15
LOW-RATED DEBT SECURITIES................................15
U.S. GOVERNMENT SECURITIES...............................16
MUNICIPAL SECURITIES.....................................17
ZERO COUPON BONDS........................................17
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES..18
ILLIQUID SECURITIES...............................................18
FOREIGN SECURITIES................................................19
DEPOSITORY RECEIPTS...............................................20
EMERGING MARKETS..................................................20
FOREIGN SOVEREIGN DEBT OBLIGATIONS................................22
BRADY BONDS.......................................................22
LOAN PARTICIPATIONS AND ASSIGNMENTS...............................23
FOREIGN CURRENCIES................................................23
FOREIGN CURRENCY EXCHANGE TRANSACTIONS............................24
REPURCHASE AGREEMENTS.............................................25
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS.................26
COMMERCIAL PAPER..................................................26
BORROWING.........................................................26
SHORT SALES.......................................................26
OPTIONS TRANSACTIONS..............................................27
IN GENERAL...............................................27
WRITING OPTIONS ON INDIVIDUAL SECURITIES.................28
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES..............29
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES.....29
RISKS OF OPTIONS TRANSACTIONS............................30
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS................31
IN GENERAL...............................................31
INTEREST RATE FUTURES CONTRACTS..........................32
OPTIONS ON INTEREST RATE FUTURES CONTRACTS...............33
SWAPS, CAPS, FLOORS AND COLLARS..........................33
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS...34
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS........35
SECURITIES INDEX FUTURES CONTRACTS................................36
RISKS OF SECURITIES INDEX FUTURES........................37
COMBINED TRANSACTIONS....................................38
PORTFOLIO TURNOVER.........................................................38
TRUSTEES AND OFFICERS......................................................38
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI.................39
INVESTMENT ADVISORY AND OTHER SERVICES.....................................39
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES..............39
DISTRIBUTION SERVICES.............................................41
RULE 18F-3 PLAN..........................................42
RULE 12B-1 DISTRIBUTION PLANS............................43
CUSTODIAN.........................................................45
FUND ACCOUNTING SERVICES..........................................45
TRANSFER AGENT AND DIVIDEND PAYING AGENT..........................46
ADMINISTRATOR.....................................................46
AUDITORS..........................................................46
BROKERAGE ALLOCATION.......................................................47
CAPITALIZATION AND VOTING RIGHTS...........................................48
SPECIAL RIGHTS AND PRIVILEGES..............................................49
AUTOMATIC INVESTMENT METHOD.......................................50
EXCHANGE OF SHARES................................................50
INITIAL SALES CHARGE SHARES..............................50
CONTINGENT DEFERRED SALES CHARGE SHARES...........................51
CLASS A..................................................51
CLASS B..................................................51
CLASS C..................................................52
CLASS I..................................................52
ALL CLASSES..............................................52
LETTER OF INTENT..................................................52
RETIREMENT PLANS..................................................53
INDIVIDUAL RETIREMENT ACCOUNTS...........................54
ROTH IRAS................................................55
QUALIFIED PLANS..........................................55
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")........................56
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS.................57
SIMPLE PLANS.............................................57
REINVESTMENT PRIVILEGE............................................57
RIGHTS OF ACCUMULATION............................................57
SYSTEMATIC WITHDRAWAL PLAN........................................58
GROUP SYSTEMATIC INVESTMENT PROGRAM...............................58
REDEMPTIONS................................................................60
CONVERSION OF CLASS B SHARES...............................................61
NET ASSET VALUE............................................................61
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............................66
DISTRIBUTIONS.....................................................67
DISPOSITION OF SHARES.............................................67
FOREIGN WITHHOLDING TAXES.........................................68
BACKUP WITHHOLDING................................................69
PERFORMANCE INFORMATION....................................................69
YIELD.............................................................69
STANDARDIZED YIELD QUOTATIONS............................70
AVERAGE ANNUAL TOTAL RETURN..............................71
CUMULATIVE TOTAL RETURN..................................74
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION....75
FINANCIAL STATEMENTS........................................................76
APPENDIX A..................................................................77
APPENDIX B..................................................................80
<PAGE>
GENERAL INFORMATION
Ivy Bond Fund and Ivy Money Market Fund are organized as separate,
diversified portfolios of the Trust, an open-end management investment company
organized as a Massachusetts business trust on December 21, 1983. Ivy
International Strategic Bond Fund is organized as a separate, non-diversified
portfolio of the Trust. Ivy Bond Fund commenced operations (Class A shares) on
September 6, 1985. The inception date for Class B and Class I shares of Ivy Bond
Fund was April 1, 1994. The inception date for Class C shares of Ivy Bond Fund
was April 30, 1996. Ivy International Strategic Bond Fund will commence
operations as of the date of this SAI. The inception date for Ivy Money Market
Fund was April 3, 1987.
Descriptions in this SAI of a particular investment practice or
technique in which a Fund may engage or a financial instrument which a Fund may
purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing the Funds' portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on a Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, is set forth below.
IVY BOND FUND
The 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, 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,
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. See Appendix A 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 ("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 in 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.
INVESTMENT RESTRICTIONS FOR IVY BOND FUND
The Fund's investment objectives as set forth in the "Summary" section
of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, the Fund may not:
(i) 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 the 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 the
Fund's prospectus;
(ii) Make investments in securities for the purpose of exercising control over
or management of the issuer;
(iii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions. The deposit or payment by the Fund of
initial or variation margin in connection with
futures contracts or relate options transactions is
not considered the purchase of a security on margin;
(iv) 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 in secured continuously by collateral
consisting of U.S. Government securities or cash or
cash equivalents maintained on daily market-to-market
basis in an amount at least equal to the current
market value of the securities loaned), or (c) the
entry into repurchase agreements with banks or
broker-dealers;
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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;
(ix) 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;
(x) Act as an underwriter of securities;
(xi) 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; or
(xii) Make short sales of securities or maintain a short position.
<PAGE>
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) 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;
(ii) purchase or sell real estate limited partnership interests;
(iii) 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;
(iv) purchase or sell interests in oil, gas and mineral leases (other
than securities of companies that invest in or sponsor such
programs); or
(v) invest more than 15% of its net assets taken at market value at
the time of the 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 the 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.
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.
IVY INTERNATIONAL STRATEGIC BOND FUND
The Fund is a non-diversified company whose investment objectives are
to seek total return by investing primarily in the debt securities of foreign
issuers and, consistent with that objective, to maximize current income. The
Fund will seek to achieve its investment objectives primarily through investment
in debt securities issued by foreign governments, government-related entities
and corporations. IMI will endeavor to achieve the Fund's investment objectives
through active management of country, sector and currency exposure.
The Fund seeks to achieve its objectives by investing primarily in a
managed portfolio of high quality bonds denominated in foreign currencies. At
least 65% of the Fund's total assets will normally be invested in bonds of
foreign issuers. In selecting bonds for the Fund's portfolio, IMI will consider
various factors, including yields, credit quality and the fundamental outlook
for currency and interest rate trends in different parts of the world. IMI may
also take into account the ability to hedge currency and local bond price risk.
To be considered a high quality bond in which the Fund primarily
invests, a bond must be rated at least BBB or better by Standard and Poor's
Ratings Group ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's") or,
if the bond is unrated, it must be considered by IMI to be of comparable quality
in local currency terms.
The Fund may invest less than 35% of its net assets in debt securities
rated Ba or below by Moody's and/or BB or below by S&P or, if unrated,
considered by IMI to be of comparable quality. The Fund will not invest in debt
securities that, at the time of investment, are rated less than C by either
Moody's or S&P.
The Fund's investments may include: debt securities issued or
guaranteed by a foreign national government, its agencies, instrumentalities or
political subdivisions; debt securities issued or guaranteed by supranational
organizations (e.g., European Investment Bank, Inter-American Development Bank
or the World Bank); corporate debt securities; bank or bank holding company debt
securities; and other debt securities, including those convertible into common
stock. The Fund may also invest in zero coupon securities which do not provide
for the periodic payment of interest and are sold at significant discount from
face value.
The Fund may also purchase securities which are not publicly offered
and may be subject to regulations applicable to restricted securities. The Fund
may invest in fixed- and floating-rate issues such as loan participations and
loan assignments. In addition, the Fund may purchase Brady Bonds and other
sovereign debt of countries that have restructured or are in the process of
restructuring their sovereign debt.
The Fund intends to diversify among several countries and market
sectors, and to have represented, in substantial proportions, debt exposure in
not less than three different countries other than the United States. Under
normal circumstances, the Fund will invest no more than 35% of the value of its
total assets in the debt securities of U.S. issuers. The Fund may engage in the
use of options, futures, forward foreign currency contracts and other
derivatives transactions, as described below, for hedging purposes, to seek to
enhance potential gain, or as substitutes for direct debt holdings. The Fund may
also engage in short sales of securities as a hedge for related securities whose
liquidity may be insufficient to render it cost effective to sell and repurchase
such securities (e.g., hedging a less liquid security of a corporate emerging
markets issuer by selling short the larger, more liquid issue of a sovereign
entity). The Fund may invest without limit in U.S. debt securities, including
short-term money market securities, for temporary defensive or emergency
purposes. It is not possible to predict the extent to which the Fund might
employ such optional strategies.
To protect against adverse movements of interest rates and for purposes
of liquidity, the Fund may also purchase short-term obligations denominated in
U.S. and foreign currencies such as, but not limited to, bank deposits, bankers'
acceptances, certificates of deposit, commercial paper, short-term government,
government agency, supranational agency and corporate obligations, and
repurchase agreements.
The Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices, or other factors that affect security values. These techniques
may involve derivative transactions such as buying and selling options and
futures contracts, entering into currency exchange contracts, and purchasing
indexed securities.
IMI can, in its discretion, use these practices to attempt to adjust
the risk and return characteristics of the Fund's portfolio of investments. If
IMI judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or increase return.
These techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In addition,
these techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
The Fund may enter into repurchase agreements with selected banks and
broker/dealers. Under a repurchase agreement, the Fund acquires securities,
subject to the seller's agreement to repurchase at a specified time and price.
The Fund may purchase securities on a when-issued or forward delivery
basis, for payment and delivery at a later date. The price and yield generally
are fixed on the date of commitment to purchase. From the time of purchase until
settlement, no interest accrues to the Fund. At the time of settlement, the
market value of the security may differ from the purchase price.
The higher yields and high income sought by the Fund may be obtainable
from high yield, higher risk securities in the lower rating categories of the
established rating services. These securities are rated Ba or lower by Moody's
or BB or lower by S&P. The Fund may invest in securities rated as low as C by
Moody's or S&P, which may indicate that the obligations are speculative to a
high degree and often in default. Securities rated lower than Baa or BBB (and
comparable unrated securities) are commonly referred to as "high yield" or
"junk" bonds and are considered to be predominantly speculative with respect to
the issuer's continuing ability to meet principal and interest payments. Should
the rating of a portfolio security be downgraded, IMI will determine whether it
is in the Fund's best interest to retain or dispose of the security. However,
should any individual bond held by the Fund be downgraded below a rating of C,
IMI currently intends to dispose of such bond based on then existing market
conditions. See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective characteristics.
As a matter of fundamental policy, the Fund may not make loans except
through the purchase of debt securities, the lending of portfolio securities or
through repurchase agreements, and may not borrow money in excess of 20% of its
total assets, except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements.
In addition, as a matter of non-fundamental policy, the Fund may not
invest more than 15% of its net assets in illiquid securities. These instruments
may be difficult to sell promptly at an acceptable price, and the sale of
certain of these instruments may be subject to legal restrictions. Difficulty in
selling these instruments may result in a loss or may be costly to the Fund. A
description of these and other policies and restrictions is contained under
"Investment Restrictions" below.
The Fund's investment objectives are fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for the Fund's investment objectives and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in the Prospectus and in this SAI are non-fundamental, and may be
changed by the Board of Trustees without shareholder approval. There can be no
assurance that the Fund's objectives will be met. 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 the descriptions of risk factors below, and the "Risk Factors
and Investment Techniques" section of the Prospectus.
Whenever an investment objective, policy or restriction of the Fund
described in the Prospectus or in this 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.
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL STRATEGIC BOND FUND
The Fund's investment objectives as set forth in the Prospectus under
"Investment Objectives and Policies," together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
with respect to the Fund without the approval of a majority of the outstanding
voting shares of the Fund. Under these restrictions, the Fund may not:
(i) 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 the 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) interest rate, currency and other
financial futures contracts and related options;
(ii) Make investments in securities for the purpose of exercising control over
or management of the issuer;
(iii) 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;
(iv) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions; the deposit or payment by the 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;
(v) Make loans, except that this restriction shall not
prohibit (a) the purchase and holding of a portion of
an issue of debt securities, (b) the lending of
portfolio securities in accordance with applicable
guidelines established by the SEC and any guidelines
established by the Trust's Trustees, or (c) entry
into repurchase agreements with banks or
broker-dealers;
(vi) Borrow amounts in excess of 20% 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 or except in
connection with reverse repurchase agreements,
provided that the Fund maintains net asset coverage
of at least 300% for all borrowings;
(vii) 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;
(viii) 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;
(ix) 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; or
(x) 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, short sales, swap
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.
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:
(xi) purchase or sell real estate limited partnership interests;
(xii) purchase or sell interests in oil, gas and mineral
leases (other than securities of companies that
invest in or sponsor such programs);
(xiii) invest more than 15% of its net assets taken at market value at
the time of the 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 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 or to other factors, is liquid; or
(xiv) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and
except that the Fund may purchase shares of other investment
companies subject to such restrictions as may be imposed by the
Investment Company Act of 1940 (the "1940 Act") and rules
thereunder.
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.
IVY MONEY MARKET FUND
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
the Prospectus and in this 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 the description of risk factors below, and the "Risk Factors and Investment
Techniques" section of the Prospectus.
Whenever an investment objective, policy or restriction described in
the Prospectus or in this 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 Funds
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
instrument: (i) debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (ii) obligations (including certificates of
deposits 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 or AA or P-2 by 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 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.
INVESTMENT RESTRICTIONS FOR IVY MONEY MARKET FUND
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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
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. 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. 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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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 each Fund to retain or dispose of such security. However, should any
individual bond held by any Fund be downgraded below a rating of C, IMI
currently intends to dispose of such bond based on then existing market
conditions.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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 may use 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 such Fund's assets. In either instance, each Fund will
maintain in a segregated account with its Custodian cash or liquid securities
equal (on a daily market-to-market basis) to the amount of its commitment to
purchase the underlying securities.
ILLIQUID SECURITIES
Ivy Bond Fund and Ivy International Strategic Bond 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 the policy of Ivy Bond Fund
and Ivy International Strategic Bond Fund 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).
FOREIGN SECURITIES
The securities of foreign issuers in which Ivy Bond Fund and Ivy
International Strategic Bond Fund may invest include non-U.S. dollar-denominated
debt securities, Euro dollar securities, sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs"), Global Depository Shares ("GDSs") and related
depository instruments, 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 Fund's domestic
investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Ivy Bond Fund and Ivy International Strategic Bond 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 each
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 each 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 each 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 each 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 each 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
each 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
each Fund's cash and securities, each 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 SOVEREIGN DEBT OBLIGATIONS
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 it debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt (including Ivy Bond Fund or Ivy International
Strategic Bond Fund) may be request to participate in the rescheduling of such
debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which sovereign debt on which governmental entities
have defaulted may be collected in whole or in part.
BRADY BONDS
Ivy International Strategic Bond Fund may invest in Brady Bonds, which
are securities created through the exchange of existing commercial bank loans to
public and private entities in certain emerging markets for new bonds in
connection with debt restructurings under a debt restructuring plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the `Brady Plan").
Brady Plan debt restructurings have been implemented to date in Argentina,
Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico,
Nigeria, Peru, the Philippines, Poland, Uruguay, and Venezuela.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds, with respect
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Ivy International Strategic Bond Fund may invest in fixed- and
floating-rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in most
instances to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans ("Assignments") from third parties.
Participations typically will result in the Fund having a contractual
relationship only with the Lender and not with the borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
the Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Fund will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the Adviser
to be creditworthy.
When the Fund purchases Assignments from Lenders, it will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.
The Fund may have difficulty disposing of Assignments and
Participation. Because no liquid market for these obligations typically exists,
the Fund anticipates that these obligations could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market will
have an adverse effect on the Fund's ability to dispose of particular
Assignments or Participations when necessary to meet the Fund's liquidity needs
or in response to a specific economic event, such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
Assignments and Participations may also make it more difficult for the Fund to
assign a value to those securities for purposes of valuing the Fund's portfolio
and calculating its net asset value.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, Ivy Bond Fund and Ivy International Strategic Bond
Fund may 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 each of these
Funds as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
each Fund may incur costs in connection with conversions between various
currencies. Although each Fund's custodian values the Fund's assets daily in
terms of U.S. dollars, each Fund does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. Each 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. Each 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 Ivy Bond Fund and Ivy International Strategic Bond Fund
normally will be invested in both U.S. and foreign securities markets, changes
in each Fund's share price may have a low correlation with movements in U.S.
markets. Each Fund's share price will reflect the movements of 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
each 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 each Fund's assets are
denominated may be devalued against the U.S. dollar, resulting in a loss to a
Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Ivy Bond Fund and Ivy International Strategic Bond Fund may enter into
forward foreign currency contracts in order to protect against uncertainty in
the level of future foreign exchange rates in the purchase and sale of
securities. 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 Ivy Bond Fund and Ivy International Strategic Bond Fund may enter
into forward contracts to reduce currency exchange risks, changes in currency
exchange rates may result in poorer overall performance for each of these Funds
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 the
Fund. An imperfect correlation of this type may prevent the Fund from achieving
the intended hedge or expose a Fund to the risk of currency exchange loss.
Ivy Bond Fund and Ivy International Strategic Bond Fund may purchase
currency forwards and combine such purchases with sufficient cash or short-term
securities to create unleveraged substitutes for investments in foreign markets
when deemed advantageous. Each Fund may also combine the foregoing with bond
futures or interest rate futures contracts to create the economic equivalent of
an unhedged foreign bond position.
Ivy Bond Fund and Ivy International Strategic Fund may also cross-hedge
currencies by entering into transactions to purchase or sell one or more
currencies that are expected to decline in value relative to other currencies to
which each Fund has or in which each Fund expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
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, Ivy Bond Fund and Ivy International Strategic
Bond Fund are 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. Each
Fund will enter into repurchase agreements only with banks and broker-dealers
deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER.
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
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 each Fund's borrowings will be fixed, a Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
SHORT SALES
Ivy International Strategic Bond Fund may engage in short sale
transactions in fixed-income securities. Short selling involves the sale of
borrowed securities. At the time a short sale is effected, the Fund incurs an
obligation to replace the security borrowed at whatever its price may be at the
time that the Fund purchases it for delivery to the lender. When a short sale
transaction is closed out by delivery of the securities, any gain or loss on the
transaction is taxable as a short-term capital gain or loss. Until the security
is replaced, the Fund is required to pay to the lender amounts equal to any
dividends or interest which accrue during the period of the loan. To borrow the
security, the Fund also may be required to pay a premium, which would increase
the cost of the security sold. Until the Fund replaces a borrowed security in
connection with a short sale, the Fund will: (a) maintain daily a segregated
account containing cash or liquid securities, at such level that (i) the amount
deposited in the segregated account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short; or (b) otherwise cover its short position.
Since short selling can result in profits when bond prices generally
decline, Ivy International Strategic Bond Fund in this manner, can, to a certain
extent, hedge the market risk to the value of its other investments and protect
its equity in a declining market. However, the Fund could, at any given time,
suffer both a loss on the purchase or retention of one security, if that
security should decline in value, and a loss on a short sale of another
security, if the security sold short should increase in value. If the Fund sells
short one security to hedge a position in a similar security, the Fund could
experience a loss due to an increase in the price of the security sold short
resulting from an incorrectly perceived correlation between the two securities
or a correlation not present at the time of the short sale transaction.
Moreover, to the extent that in a generally rising market the Fund maintains
short positions in securities rising with the market, the net asset value of the
Fund would be expected to increase to a lesser extent than the net asset value
of an investment company that does not engage in short sales.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would negotiate directly with the counterparty.
Ivy Bond Fund or Ivy International Strategic Bond 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 a 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."
Ivy Bond or Ivy International Strategic Bond 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 the 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 the 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 each 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, the 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. Ivy Bond Fund and Ivy
International Strategic Bond 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. Each of these Funds 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 for the options). In view of the investment
objectives of these Funds, each 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 "covered" call option means generally that so long as a 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Ivy Bond
Fund and Ivy International Strategic Bond Fund may purchase call options on
individual securities only to effect a "closing purchase transaction."
As the writer of a call option, each 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 the 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. Ivy Bond Fund and Ivy
International Strategic Bond Fund may purchase put options on underlying
securities owned by the Funds as a defensive technique in order to protect
against an anticipated decline in the value of the securities. Each of these
Funds, 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 the
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 any Fund for leverage purposes.
Ivy Bond Fund and Ivy International Strategic Bond Fund may also
purchase put options on underlying securities that they own 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, the 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. The
Funds may write (sell) put options on individual securities only to effect a
"closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Ivy Bond Fund
and Ivy International Strategic Bond 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. Call options on indices are similar
to call 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 the
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 the
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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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 Ivy Bond Fund or Ivy International Strategic Bond 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, the 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 Ivy
Bond Fund or Ivy International Strategic Bond 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. Transfer of an OTC option is
usually prohibited absent the consent of the original counterparty. 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. An OTC counterparty may fail to deliver
or to pay, as the case may be. 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.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Ivy Bond Fund's and Ivy International Strategic Bond Fund's options activities
also may have an impact upon the level of their portfolio turnover and brokerage
commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Ivy Bond Fund and Ivy International Strategic Bond 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,
that Fund is required to deposit with its custodian (or broker, if legally
permitted) 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 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, each Fund will
mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each 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, each 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
INTEREST RATE FUTURES CONTRACTS. 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,
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 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.
Ivy Bond Fund and Ivy International Strategic Bond Fund may sell
interest rate futures contracts in order to hedge their portfolio securities
whose value may be sensitive to changes in interest rates. In addition, each of
these Funds could purchase and sell these futures contracts in order to hedge
its holdings in certain common stocks (such as utilities, banks and savings and
loan) whose value may be sensitive to change in interests rates. Each Fund could
sell interest rate futures contracts in anticipation of or doing 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. If such purchases are made, an equivalent amount of
interest rate futures contracts will be terminated by offsetting sales. Each
Fund may also maintain the futures contract as a substitute for the underlying
securities.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. Ivy Bond Fund and Ivy
International Strategic Bond Fund may also purchase and write put and call
options on interest rate futures contracts which are traded on a U.S. exchange
or board of trade and sell or purchase such options to terminate an existing
position. 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 would enable each 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 in
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 particular Fund's portfolio securities
which have been hedged. However, if after a 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.
SWAPS, CAPS, FLOORS AND COLLARS. Ivy International Strategic Bond Fund
may enter into interest rate, currency, credit and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. Credit swaps involve the exchange by the Fund with a
counterparty of their respective committments to pay or receive the difference
in interest rates between a firm or country's rate and the risk free rate. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rate or values.
Ivy International Strategic Bond Fund may enter credit protection swap
arrangements involving the sale by the Fund of a put option on a debt security
which is exercisable by the buyer upon certain events, such as a default by the
referenced creditor on the underlying debt or a bankruptcy event of the
creditor.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, IMI and the
Fund believe such obligations do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. The Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction, the unsecured
long-term debt of the counterparty, combined with any credit enhancements, is
rated at least A by S&P or Moody's or has an equivalent rating from a nationally
recognized statistical rating organization or is determined to be of equivalent
credit quality by IMI. If there is a default by the counterparty, the Fund may
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Ivy Bond Fund
and Ivy International Strategic Bond 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.
Ivy Bond Fund and Ivy International Strategic Bond 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 each of these Funds 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. Each 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.
Each Fund will only enter into 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. Each 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. 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 a
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
Ivy International Strategic Bond Fund may enter into securities index
futures contracts as an efficient means of regulating the Fund's exposure to the
equity markets. The 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 the 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, the
Fund will gain $2,000 (500 units x gain of $4). If the 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. Ivy International Strategic Bond
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.
The 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, the 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although the 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,
the 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, the 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.
The 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. The
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, the Fund will maintain 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, the 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 an index futures contract, the Fund will maintain with its
Custodian (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, the 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
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. Ivy Bond Fund and Ivy International Strategic
Bond 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.
PORTFOLIO TURNOVER
Ivy Bond Fund and Ivy International Strategic Bond Fund purchase
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, each of these Funds 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 the 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. Each 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 the Fund's portfolio turnover
rate, all securities whose maturities at the time of acquisition were one year
or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 each 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.
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"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Asia Pacific Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund II, Ivy International Fund, Ivy International Small Companies
Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy
US Emerging Growth Fund. IMI also provides business management services to Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account 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 each 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 each Fund's Custodian and
monitor the services it provides to the 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 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 each 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. During the fiscal years
ended December 31, 1996, 1997 and 1998, Ivy Bond Fund paid IMI fees of $781,647,
$800,555, and $1,042,273, respectively. During the same periods, IMI reimbursed
Fund expenses in the amount of $0, $0, and $0, respectively.
Ivy International Strategic Bond Fund pays IMI a monthly fee for
providing business management and investment advisory services at an annual rate
of 0.75% of the Fund's average net assets.
Ivy Money Market Fund pays IMI a monthly fee for providing business
management and investment advisory services, 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, 1996, 1997 and 1998, Ivy Money Market Fund paid IMI
$80,302, $83,294 and $102,727, respectively. During the same periods IMI
reimbursed Fund expenses in the amount of $199,546, $83,294 and $140,140,
respectively, pursuant to expense limitations).
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 Bond 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 the
Fund's expenses and increase its yield.
IMI currently limits Ivy International Strategic Bond Fund's total
operating expenses (excluding 12b-1 fees, interest, taxes, brokerage
commissions, litigation, class-specific expenses, indemnification expenses, and
extraordinary expenses) to an annual rate of 1.25% of the Fund's average net
assets, which may lower the Fund's expenses and increase its yield.
IMI currently limits Ivy Money Market 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 Agreement will continue in effect with respect to each Fund from
year to year, 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 each 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 the shareholders, continuance (or adoption)
shall be effected with respect to each Fund only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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. Shares of Ivy Money Market Fund are sold at
the Fund's net asset value per share without a sales load.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
Pursuant to the Distribution Agreement, IMDI is entitled to deduct a
commission on all Class A shares of Ivy Bond Fund and Ivy International
Strategic Bond Fund sold equal to the difference, if any, between the public
offering price, as set forth in each Fund's 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
of Ivy Bond Fund and Ivy International Strategic Bond Fund sold without an
initial sales charge and Class B and Class C shares of Ivy Bond Fund and Ivy
International Strategic Bond Fund, 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 year ended December 31, 1998, IMDI received from
sales of Class A shares of Ivy Bond Fund $177,369 in sales commissions, of which
$23,981 was retained after dealer allowances. During the fiscal year ended
December 31, 1998, IMDI received $82,472 in CDSCs on redemptions of Class B
shares of Ivy Bond Fund. During the fiscal year ended December 31, 1998, IMDI
received $11,226 in CDSCs on redemptions of Class C shares of Ivy Bond Fund.
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 each
Fund. The Distribution Agreement may be terminated with respect to each Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
that Fund or by a Fund by vote of either a majority of the outstanding voting
securities of that 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.
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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan for Ivy Bond Fund and Ivy International Strategic Bond Fund
are as follows: (i) shares of each class of the 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 each Fund may be exchanged for shares of the same class of another Ivy fund;
and (iii) each 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.
At a meeting held on December 1-2, 1995, the Board of the Trust adopted
a multi-class plan on behalf of Ivy Money Market 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
Ivy Money Market 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 Ivy Money Market Fund) that are
being exchanged for shares of Ivy Money Market Fund. In all other relevant
respects, Ivy Money Market 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).
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on behalf of Ivy
Bond Fund and Ivy International Strategic Bond Fund, in accordance with Rule
12b-1 under the 1940 Act, separate Rule 12b-1 distribution plans pertaining to
each Fund's 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 each Fund's shares in the absence of a Plan or under
an alternative distribution arrangement.
Under each Plan, Ivy Bond Fund and Ivy International Strategic Bond
Fund each 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. This fee constitutes
reimbursement to IMDI for service fees paid by IMDI. 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 each
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 each Fund's Class B and Class C Plans, each of Ivy Bond Fund and
Ivy International Strategic Bond 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. This fee constitutes
compensation to IMDI which is not dependent on expenses incurred by IMDI. 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 each Fund's 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 Independent Trustees 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 each 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.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii)in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1998, Ivy Bond Fund paid
IMDI $286,205 pursuant to its Class A plan. During the fiscal year ended
December 31, 1998, Ivy Bond Fund paid IMDI $339,823 pursuant to its Class B
plan. During the fiscal year ended December 31, 1998, Ivy Bond Fund paid IMDI
$97,011 pursuant to its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of Ivy Bond Fund: advertising
$10,207; printing and mailing of prospectuses to persons other than current
shareholders, $33,695; compensation to dealers, $53,099; compensation to sales
personnel $324,579; seminars and meetings, $13,279; travel and entertainment,
$25,942; general and administrative, $185,837; telephone, $9,427; and occupancy
and equipment rental, $27,170.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of Ivy Bond Fund: advertising,
$3,097; printing and mailing of prospectuses to persons other than current
shareholders, $10,547; compensation to dealers, $249,386; compensation to sales
personnel, $99,341; seminars and meetings, $62,347; travel and entertainment,
$7,987; general and administrative, $56,767; telephone, $2,863; and occupancy
and equipment rental $8,140.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of Ivy Bond Fund: advertising,
$881; printing and mailing of prospectuses to persons other than current
shareholders, $3,018; compensation to dealers, $45,333; compensation to sales
personnel, $28,204; seminars and meetings, $11,333; travel and entertainment,
$2,266; general administrative, $16,112; telephone, $813; and occupancy and
equipment rental, $2,311.
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 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 that 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, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee for Ivy Money Market Fund is 0.10% of the Fund's
average net assets. The monthly fee for Ivy Bond Fund and Ivy International
Strategic Bond Fund is based upon the net assets of the 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.
During the fiscal year ended December 31, 1998, Ivy Bond Fund paid
MIMI $102,796 under the agreement.
During the fiscal year ended December 31, 1998, Ivy Money Market Fund paid MIMI
$32,570 under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, Ivy Bond Fund pays a monthly
fee at an annual rate of $20.75 for each open Class A, Class B, Class C and
Advisor Class account. Ivy International Strategic Bond Fund pays a montly fee
at an annual rate of $20.00 for each open Class A, Class B, Class C, and Advisor
Class account. Each Fund pays a monthly fee at an annual rate of $10.25 for each
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 Ivy Bond Fund for the fiscal year ended December 31,
1998 totaled $260,700. Ivy Money Market pays IMSC an annual fee of $22.00 per
open account and $4.58 for each account that is closed, and reimburses IMSC
monthly for out-of-pocket expenses. Such fees and expenses for Ivy Money Market
Fund for the fiscal year ended December 31, 1998 totaled $93,104. Certain
broker-dealers that maintain shareholder accounts with each 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., 0.10%) 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 0.10% of the
Fund's average daily net assets with respect to its Class A, Class B and Class C
shares, and, except for Ivy Money Market Fund, Advisor Class shares. Ivy Bond
Fund and Ivy International Strategic Bond Fund each pay MIMI a monthly fee at
the annual rate of 0.01% of its average daily net assets for Class I. Such fees
for the fiscal year ended December 31, 1998 for Ivy Bond Fund totaled $158,455.
Such fees for the fiscal year ended December 31, 1998 for Ivy Money Market Fund
totaled $25,682.
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 Ivy Bond
Fund and Ivy International Strategic Bond Fund.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 each
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 each 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, 1996, 1997 and 1998, Ivy
Bond Fund paid brokerage commissions of $398, $1,361, and $0, respectively.
During the fiscal years ended December 31, 1996, 1997, and 1998, Ivy
Money Market Fund paid brokerage commission of $0, $0, and $0, respectively.
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 deems to be a desirable investment for the Fund.
While no minimum has been established, it is expected that each 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 any Fund shares with
securities and may discontinue accepting securities as payment for any 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 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund, as well as Class I shares
for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 that 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 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 a 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.
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.
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 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities 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 II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund (the other sixteen series
of the Trust). (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 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 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 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 of Ivy Bond Fund and
Ivy International Strategic Bond Fund 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 of these Funds 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).
Ivy Bond Fund and Ivy International Strategic Bond Fund may, from
time to time, waive the initial sales charge on its Class A shares sold to
clients of The Legend Group and United Planners Financial Services of America,
Inc. This privilege will apply only to Class A Shares of a Fund that are
purchased using all or a portion of the proceeds obtained by such clients
through redemptions of shares of a mutual fund (other than one of the Funds) on
which a sales charge was paid (the "NAV transfer privilege"). Purchases eligible
for the NAV transfer privilege must be made within 60 days of redemption from
the other fund, and the Class A shares purchased are subject to a 1.00% CDSC on
shares redeemed within the first year after purchase. The NAV transfer privilege
also applies to Fund shares purchased directly by clients of such dealers as
long as their accounts are linked to the dealer's master account. The normal
service fee, as described in the "Initial Sales Charge Alternative - Class A
Shares" section of the Prospectus, will be paid to those dealers in connection
with these purchases. IMDI may from time to time pay a special cash incentive to
The Legend Group or United Planners Financial Services of America, Inc. in
connection with sales of shares of a Fund by its registered representative under
the NAV transfer privilege. Additional information on sales charge reductions or
waivers may be obtained from IMDI at the address listed on the cover of this
Statement of Additional Information.
CONTINGENT DEFERRED SALES CHARGE SHARES
CLASS A: Class A shareholders of Ivy Bond Fund and Ivy International
Strategic Bond Fund 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 of Ivy Bond Fund and Ivy International
Strategic Bond Fund 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 Ivy Bond Fund or Ivy International Strategic Bond
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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund:
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders of Ivy Bond Fund and Ivy International
Strategic Bond Fund 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 1.00% 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 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). No exchange out of any Fund (other than by a complete
exchange of all Fund shares) may be made if it would reduce the shareholder's
interest in that Fund to less than $1,000 ($250,000 in the case of Class I
shares).
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.
LETTER OF INTENT
Reduced sales charges apply to initial investments in Class A shares of
Ivy Bond Fund and Ivy International Strategic Bond 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 Ivy Bond Fund or Ivy International Strategic Bond
Fund. A Letter of Intent may be submitted at the time of an initial purchase of
Class A shares of these Funds 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 Bond Fund, Ivy China Region Fund,
Ivy Developing Nations Fund, Ivy European Opportunities 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 II, Ivy
International Fund, Ivy International Small Companies Fund, Ivy International
Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue
Chip Fund and Ivy US Emerging Growth 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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of Ivy Bond Fund or Ivy
International Strategic Bond Fund may reinvest all or a part of the proceeds of
the redemption back into Class A shares of the same 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 Ivy Bond Fund or Ivy International Strategic Bond
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 such funds (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 all funds other than Ivy Bond Fund; or
$100,000 or more for Ivy Bond 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) 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 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 Ivy Bond Fund and Ivy International Strategic Bond
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 Ivy Bond Fund and Ivy International
Strategic Bond 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 Ivy Bond Fund and Ivy International Strategic Bond 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.
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. Ivy Money Market 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 Ivy Money Market
Fund, the contingent deferred sales charge will carry over to the investment in
Ivy Money Market 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 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 the Funds.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in any 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 each 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, each 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 Ivy Bond Fund and Ivy
International Strategic Bond Fund will automatically convert to Class A shares
of those Funds, 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 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.
NET ASSET VALUE
The net asset value per share of each 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 the Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among that 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 each 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.
Pursuant to SEC rules, Ivy Money Market 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 have 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.
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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
any Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), 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 Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Fund does not price its shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 that Fund. If a 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 each 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 the Funds may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by the Funds, 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, each 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 each 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 each 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
Ivy Bond Fund and Ivy International Strategic Bond 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. The 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.
Each 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 each 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 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. Each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable 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 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 shareholders as long-term
capital gains 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 any 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, will be long-term or
short-term, 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 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.
FOREIGN WITHHOLDING TAXES
Income received by any 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, that Fund will
be eligible and may elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the 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 the 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 each Fund's taxable year whether the foreign taxes
paid by that 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 the
Fund's income flows through to its shareholders. With respect to each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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.
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 each 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 any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of Ivy Bond Fund and
Ivy International Strategic Bond Fund 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 the
Funds' 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 each 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
indicate future performance.
YIELD
IVY MONEY MARKET FUND
Ivy Money Market 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. Ivy Money Market 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.
Ivy Money Market Fund's current yield for the seven-day period ended
December 31, 1998 was 4.11%. 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 3.38%.
IVY BOND FUND AND IVY INTERNATIONAL STRATEGIC BOND FUND
Quotations of yield for a specific class of shares of the 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 yields for Class A, Class B, and Class C shares of the Ivy Bond
Fund for the 30-day period ended December 31, 1998 were (0.75)%, (0.83)%, and
(0.81)%, respectively.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of Ivy Bond
Fund and Ivy International Strategic Bond Fund will be expressed in terms of the
average annual compounded rate of return that would cause a hypothetical
investment in that class of each 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that 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
4.75% sales charge for Ivy Bond Fund, or 5.75% sales charge for Ivy
International Strategic Bond Fund, 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 each Fund 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%.
Each 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 table summarizes the calculation of Standardized and
Non-Standardized Return for the Class A, Class B, Class C, and Class I shares of
Ivy Bond Fund for the periods indicated. In determining the average annual total
return for a specific class of shares of the 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 the 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 Fund.
<TABLE>
<CAPTION>
STANDARDIZED RETURN FOR IVY BOND FUND[*]
<S> <C> <C> <C> <C>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
One year ended December
31, 1998
(4.75)% (5.77)% (1.81)% N/A
Five years ended
December 31, 1998
5.33% N/A N/A N/A
Ten years ended
December 31, 1998
8.32% N/A N/A N/A
Inception [#] to year
ended December 31, 1998
[8]: 8.28% 6.15% 7.04% N/A
NON-STANDARDIZED RETURN FOR IVY BOND FUND[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31,
1998
0.00% (0.81)% (0.81)% N/A
Five years ended
December 31, 1998
6.36% N/A N/A N/A
Ten years ended
December 31, 1998
8.85% N/A N/A N/A
Inception [#] to year
ended December 31, 1998
[8]: 8.67% 6.48% 7.04% N/A
- ------------------------- ----------------- ------------------ -----------------
</TABLE>
[*] 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 was
April 30, 1996.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one,
five and ten year periods ended December 31, 1998 would have been 2.05%,
(4.75)%, 5.33%, and 8.18%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been 6.15% and (5.77)%,
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, 1998.)
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year ended December 31, 1998 would have been 7.04% and (1.81)%, 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, 1998.)
[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 period from inception through December 31, 1998 and the
one, five and ten year periods ended December 31, 1998 would have been 2.44%,
0.00%, 6.36%, and 8.70%, 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 period from inception through December 31, 1998 and the
one year ended December 31, 1998 would have been 6.48% and (0.81)%,
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 or ten year periods ending December 31, 1998.)
[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 period from inception through December 31, 1998 and the
one year ending December 31, 1998 would have been 7.04% and (0.81)%,
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, 1998.)
[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.
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 Ivy Bond Fund or Ivy International Strategic Bond 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's 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.
The following table summarizes the calculation of Cumulative Total
Return for Ivy Bond Fund for the periods indicated through December 31, 1998,
assuming the maximum 4.75% sales charge has been assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SINCE INCEPTION[*]
ONE YEAR FIVE YEARS TEN YEARS
Class A (4.75)% 29.65% 122.36% 188.76%
Class B (5.77)% N/A N/A 32.78%
Class C (1.81)% N/A N/A 19.92%
Class I N/A N/A N/A N/A
</TABLE>
The following table summarizes the calculation of Cumulative Total
Return for Ivy Bond Fund for the periods indicated through December 31, 1998,
assuming the maximum 4.75% sales charge has not been assessed.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A 0.00% 36.12% 133.45% 203.16%
Class B (0.81)% N/A N/A 34.78%
Class C (0.81)% N/A N/A 19.92%
Class I N/A N/A N/A N/A
</TABLE>
[*] 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 Ivy Bond Fund (Class A shares) 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.
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 each Fund will vary from time to time
depending on market conditions, the composition of the Fund's portfolio and
operating expenses of each 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 each Fund's shares and the risks associated with each 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.
Each 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
Ivy Bond Fund's and Ivy Money Market Fund's Portfolio of Investments
as of December 31, 1998, Statement of Assets and Liabilities as of December 31,
1998, Statement of Operations for the fiscal year ended December 31, 1998,
Statement of Changes in Net Assets for the fiscal year ended December 31, 1998,
Financial Highlights, Notes to Financial Statements, and Report of Independent
Accountants, which are included in each Fund's December 31, 1998 Annual Report
to shareholders, are incorporated by reference into this SAI. Ivy International
Strategic Bond Fund's Statement of Assets and Liabilities as of April 28, 1999
and the notes thereto are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 28, 1999
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY INTERNATIONAL STRATEGIC BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
ASSETS
Cash...................................................... $ 1,000,040
Prepaid offering cost..................................... 33,000
Prepaid blue sky fees..................................... 24,000
Total Assets.......................................... 1,057,040
------------
LIABILITIES
Due to affiliate.......................................... 57,000
------------
NET ASSETS..................................................... $ 1,000,040
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)........................ $ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 95.25)*............................... $ 10.50
=======
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding)........................ $ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding).........................$ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)..........................$ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($1,000,000.00 / 100,000 shares outstanding)...........$ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $1,000,040
=======
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 5%.
*** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 1%.
<PAGE>
The accompanying notes are an integral part of the
financial statement.
IVY INTERNATIONAL STRATEGIC BOND FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
1. ORGANIZATION: Ivy International Strategic Bond Fund is a non-diversified
series of shares of Ivy Fund. The shares of beneficial interest are assigned no
par value and an unlimited number of shares of Class A, Class B, Class C, Class
I and Advisor Class are authorized. Ivy Fund was organized as a Massachusetts
business trust under a Declaration of Trust dated December 21, 1983 and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund will commence operations on May 3, 1999. As of the date of this
report, operations have been limited to organizational matters and the issuance
of initial shares to Mackenzie Investment Management Inc. (MIMI).
2. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of $10,700,
comprised of $2,500 for auditing and $8,200 for legal. The full amount of
organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COST AND PREPAID BLUE SKY FEES: Offering cost, consisting of legal
fees, and blue sky fees will be amortized over a one year period beginning April
30, 1999, the date the Fund is expected to commence operations. Offering cost
and blue sky fees have been paid by MIMI and will be reimbursed by the Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly owned
subsidiary of MIMI, is the Manager and Investment Manager of the Fund. For the
current fiscal year, IMI contractually limits the Fund's total operating
expenses (excluding taxes, 12b-1 fees, brokerage commissions, interest,
litigation and indemnification expenses, and any other extraordinary expenses)
to an annual rate of 1.25% of its average net assets. For each of the following
nine years, IMI will ensure that these expenses do not exceed 2.50% of the
Fund's average net assets.
MIMI provides certain administrative, accounting and pricing services for the
Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the
Fund.
Officers of Ivy Fund are officers and/or employees of MIMI, IMI, IMDI and IMSC.
Such individuals are not compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are not affiliated with MIMI
or IMI receive compensation from the Fund. No such amounts have been incurred as
of April 28, 1999.
<PAGE>
IVY BOND FUND
IVY INTERNATIONAL STRATEGIC BOND 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
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Advisor Class shares of Ivy Bond Fund and Ivy International Strategic Bond Fund
(each a "Fund"). The other seventeen portfolios of the Trust are described in
separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Advisor Class Shares of the Funds dated May 3, 1999
(the "Prospectus"), which may be obtained upon request and without charge from
the Trust at the Distributor's address and telephone number printed below.
Advisor Class shares are only offered to certain investors (see the Prospectus.)
The Funds also offer Class A, B, C and I 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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
iii
TABLE OF CONTENTS
GENERAL INFORMATION..........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..................................1
IVY BOND FUND.......................................................1
INVESTMENT RESTRICTIONS FOR IVY BOND FUND...........................2
IVY INTERNATIONAL STRATEGIC BOND FUND...............................4
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL STRATEGIC BOND FUND...7
COMMON STOCKS.......................................................9
CONVERTIBLE SECURITIES..............................................9
DEBT SECURITIES....................................................10
IN GENERAL................................................10
INVESTMENT-GRADE DEBT SECURITIES..........................10
LOW-RATED DEBT SECURITIES.................................11
U.S. GOVERNMENT SECURITIES................................12
MUNICIPAL SECURITIES......................................12
ZERO COUPON BONDS.........................................13
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED" SECURITIES...13
ILLIQUID SECURITIES................................................13
FOREIGN SECURITIES.................................................14
DEPOSITORY RECEIPTS................................................15
EMERGING MARKETS...................................................15
FOREIGN SOVEREIGN DEBT OBLIGATIONS.................................17
BRADY BONDS........................................................17
LOAN PARTICIPATIONS AND ASSIGNMENTS................................18
FOREIGN CURRENCIES.................................................18
FOREIGN CURRENCY EXCHANGE TRANSACTIONS.............................19
REPURCHASE AGREEMENTS..............................................20
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS..................20
COMMERCIAL PAPER...................................................21
BORROWING..........................................................21
SHORT SALES........................................................21
OPTIONS TRANSACTIONS...............................................22
IN GENERAL................................................22
WRITING OPTIONS ON INDIVIDUAL SECURITIES..................23
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES...............23
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES......24
RISKS OF OPTIONS TRANSACTIONS.............................24
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.................25
IN GENERAL................................................25
INTEREST RATE FUTURES CONTRACTS...........................26
OPTIONS ON INTEREST RATE FUTURES CONTRACTS................27
SWAPS, CAPS, FLOORS AND COLLARS...........................27
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS....28
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS.........29
SECURITIES INDEX FUTURES CONTRACTS.................................30
RISKS OF SECURITIES INDEX FUTURES.........................30
COMBINED TRANSACTIONS.....................................32
PORTFOLIO TURNOVER..........................................................32
TRUSTEES AND OFFICERS.......................................................32
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI..................32
INVESTMENT ADVISORY AND OTHER SERVICES......................................33
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES...............33
DISTRIBUTION SERVICES..............................................34
RULE 18F-3 PLAN...........................................35
CUSTODIAN..........................................................35
FUND ACCOUNTING SERVICES...........................................36
TRANSFER AGENT AND DIVIDEND PAYING AGENT...........................36
ADMINISTRATOR......................................................36
AUDITORS...........................................................36
BROKERAGE ALLOCATION........................................................36
CAPITALIZATION AND VOTING RIGHTS............................................37
SPECIAL RIGHTS AND PRIVILEGES...............................................39
AUTOMATIC INVESTMENT METHOD........................................39
EXCHANGE OF SHARES.................................................39
RETIREMENT PLANS...................................................40
INDIVIDUAL RETIREMENT ACCOUNTS............................40
ROTH IRAS.................................................41
QUALIFIED PLANS...........................................42
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")........................43
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS..................43
SIMPLE PLANS..............................................43
SYSTEMATIC WITHDRAWAL PLAN.........................................44
GROUP SYSTEMATIC INVESTMENT PROGRAM................................44
REDEMPTIONS.................................................................45
NET ASSET VALUE.............................................................46
TAXATION 47
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS............48
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES.............49
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES.................49
DEBT SECURITIES ACQUIRED AT A DISCOUNT.............................50
DISTRIBUTIONS......................................................50
DISPOSITION OF SHARES..............................................51
FOREIGN WITHHOLDING TAXES..........................................51
BACKUP WITHHOLDING.................................................52
PERFORMANCE INFORMATION.....................................................53
YIELD..............................................................53
AVERAGE ANNUAL TOTAL RETURN...............................53
CUMULATIVE TOTAL RETURN...................................54
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION.....55
FINANCIAL STATEMENTS........................................................55
APPENDIX A..................................................................57
<PAGE>
62
GENERAL INFORMATION
Ivy Bond 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 International Strategic Bond Fund is
organized as a separate, non-diversified portfolio of the Trust. Ivy Bond Fund
commenced operations (Class A shares) on September 6, 1985. Advisor Class shares
were first offered on January 1, 1998. Ivy International Strategic Bond Fund
will commence operations (all classes) as of the date of this SAI.
Descriptions in this SAI of a particular investment practice or
technique in which a Fund may engage or a financial instrument which a Fund may
purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing the Funds' portfolio
assets. IMI may, in its discretion, at any time employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Certain practices, techniques,
or instruments may not be principal activities of a Fund but, to the extent
employed, could from time to time have a material impact on a Fund's
performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, is set forth below.
IVY BOND FUND
The 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, 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,
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. See Appendix A 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 ("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 in 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.
INVESTMENT RESTRICTIONS FOR IVY BOND FUND
The Fund's investment objectives as set forth in the "Summary" section
of the Prospectus, 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 of the outstanding voting shares of the Fund. Under these
restrictions, the Fund may not:
(i) 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 the 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 the
Fund's prospectus;
(ii) Make investments in securities for the purpose of exercising control over
or management of the issuer;
(iii) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions. The deposit or payment by the Fund of
initial or variation margin in connection with
futures contracts or relate options transactions is
not considered the purchase of a security on margin;
(iv) 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 in secured continuously by collateral
consisting of U.S. Government securities or cash or
cash equivalents maintained on daily market-to-market
basis in an amount at least equal to the current
market value of the securities loaned), or (c) the
entry into repurchase agreements with banks or
broker-dealers;
(v) 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;
(vi) 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;
(vii) 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;
(viii) 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;
(ix) 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;
(x) Act as an underwriter of securities;
(xi) 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; or
(xii) Make short sales of securities or maintain a short position.
<PAGE>
ADDITIONAL RESTRICTIONS
Ivy Bond 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) 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;
(ii) purchase or sell real estate limited partnership interests;
(iii) 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;
(iv) purchase or sell interests in oil, gas and mineral leases (other
than securities of companies that invest in or sponsor such
programs); or
(v) invest more than 15% of its net assets taken at market value at
the time of the 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 the 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. 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.
IVY INTERNATIONAL STRATEGIC BOND FUND
The Fund is a non-diversified company whose investment objectives are
to seek total return by investing primarily in the debt securities of foreign
issuers and, consistent with that objective, to maximize current income. The
Fund will seek to achieve its investment objectives primarily through investment
in debt securities issued by foreign governments, government-related entities
and corporations. IMI will endeavor to achieve the Fund's investment objectives
through active management of country, sector and currency exposure.
The Fund seeks to achieve its objectives by investing primarily in a
managed portfolio of high quality bonds denominated in foreign currencies. At
least 65% of the Fund's total assets will normally be invested in bonds of
foreign issuers. In selecting bonds for the Fund's portfolio, IMI will consider
various factors, including yields, credit quality and the fundamental outlook
for currency and interest rate trends in different parts of the world. IMI may
also take into account the ability to hedge currency and local bond price risk.
To be considered a high quality bond in which the Fund primarily
invests, a bond must be rated at least BBB or better by Standard and Poor's
Ratings Group ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's") or,
if the bond is unrated, it must be considered by IMI to be of comparable quality
in local currency terms.
The Fund may invest less than 35% of its net assets in debt securities
rated Ba or below by Moody's and/or BB or below by S&P or, if unrated,
considered by IMI to be of comparable quality. The Fund will not invest in debt
securities that, at the time of investment, are rated less than C by either
Moody's or S&P.
The Fund's investments may include: debt securities issued or
guaranteed by a foreign national government, its agencies, instrumentalities or
political subdivisions; debt securities issued or guaranteed by supranational
organizations (e.g., European Investment Bank, Inter-American Development Bank
or the World Bank); corporate debt securities; bank or bank holding company debt
securities; and other debt securities, including those convertible into common
stock. The Fund may also invest in zero coupon securities which do not provide
for the periodic payment of interest and are sold at significant discount from
face value.
The Fund may also purchase securities which are not publicly offered
and may be subject to regulations applicable to restricted securities. The Fund
may invest in fixed- and floating-rate issues such as loan participations and
loan assignments. In addition, the Fund may purchase Brady Bonds and other
sovereign debt of countries that have restructured or are in the process of
restructuring their sovereign debt.
The Fund intends to diversify among several countries and market
sectors, and to have represented, in substantial proportions, debt exposure in
not less than three different countries other than the United States. Under
normal circumstances, the Fund will invest no more than 35% of the value of its
total assets in the debt securities of U.S. issuers. The Fund may engage in the
use of options, futures, forward foreign currency contracts and other
derivatives transactions, as described below, for hedging purposes, to seek to
enhance potential gain, or as substitutes for direct debt holdings. The Fund may
also engage in short sales of securities as a hedge for related securities whose
liquidity may be insufficient to render it cost effective to sell and repurchase
such securities (e.g., hedging a less liquid security of a corporate emerging
markets issuer by selling short the larger, more liquid issue of a sovereign
entity). The Fund may invest without limit in U.S. debt securities, including
short-term money market securities, for temporary defensive or emergency
purposes. It is not possible to predict the extent to which the Fund might
employ such optional strategies.
To protect against adverse movements of interest rates and for purposes
of liquidity, the Fund may also purchase short-term obligations denominated in
U.S. and foreign currencies such as, but not limited to, bank deposits, bankers'
acceptances, certificates of deposit, commercial paper, short-term government,
government agency, supranational agency and corporate obligations, and
repurchase agreements.
The Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices, or other factors that affect security values. These techniques
may involve derivative transactions such as buying and selling options and
futures contracts, entering into currency exchange contracts, and purchasing
indexed securities.
IMI can, in its discretion, use these practices to attempt to adjust
the risk and return characteristics of the Fund's portfolio of investments. If
IMI judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or increase return.
These techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In addition,
these techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
The Fund may enter into repurchase agreements with selected banks and
broker/dealers. Under a repurchase agreement, the Fund acquires securities,
subject to the seller's agreement to repurchase at a specified time and price.
The Fund may purchase securities on a when-issued or forward delivery
basis, for payment and delivery at a later date. The price and yield generally
are fixed on the date of commitment to purchase. From the time of purchase until
settlement, no interest accrues to the Fund. At the time of settlement, the
market value of the security may differ from the purchase price.
The higher yields and high income sought by the Fund may be obtainable
from high yield, higher risk securities in the lower rating categories of the
established rating services. These securities are rated Ba or lower by Moody's
or BB or lower by S&P. The Fund may invest in securities rated as low as C by
Moody's or S&P, which may indicate that the obligations are speculative to a
high degree and often in default. Securities rated lower than Baa or BBB (and
comparable unrated securities) are commonly referred to as "high yield" or
"junk" bonds and are considered to be predominantly speculative with respect to
the issuer's continuing ability to meet principal and interest payments. Should
the rating of a portfolio security be downgraded, IMI will determine whether it
is in the Fund's best interest to retain or dispose of the security. However,
should any individual bond held by the Fund be downgraded below a rating of C,
IMI currently intends to dispose of such bond based on then existing market
conditions. See Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective characteristics.
As a matter of fundamental policy, the Fund may not make loans except
through the purchase of debt securities, the lending of portfolio securities or
through repurchase agreements, and may not borrow money in excess of 20% of its
total assets, except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements.
In addition, as a matter of non-fundamental policy, the Fund may not
invest more than 15% of its net assets in illiquid securities. These instruments
may be difficult to sell promptly at an acceptable price, and the sale of
certain of these instruments may be subject to legal restrictions. Difficulty in
selling these instruments may result in a loss or may be costly to the Fund. A
description of these and other policies and restrictions is contained under
"Investment Restrictions" below.
The Fund's investment objectives are fundamental and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Except for the Fund's investment objectives and those investment restrictions
specifically identified as fundamental, all investment policies and practices
described in the Prospectus and in this SAI are non-fundamental, and may be
changed by the Board of Trustees without shareholder approval. There can be no
assurance that the Fund's objectives will be met. 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 the descriptions of risk factors below, and the "Risk Factors
and Investment Techniques" section of the Prospectus.
Whenever an investment objective, policy or restriction of the Fund
described in the Prospectus or in this 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.
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL STRATEGIC BOND FUND
Ivy International Strategic Bond Fund's investment objectives as set
forth in the Prospectus under "Investment Objectives and Policies," together
with the investment restrictions set forth below, are fundamental policies of
the Fund and may not be changed with respect to the Fund without the approval of
a majority of the outstanding voting shares of the Fund. Under these
restrictions, the Fund may not:
(i) 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 the 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) interest rate, currency and other
financial futures contracts and related options;
(ii) Make investments in securities for the purpose of exercising control over
or management of the issuer;
(iii) 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;
(iv) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions; the deposit or payment by the 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;
(v) Make loans, except that this restriction shall not
prohibit (a) the purchase and holding of a portion of
an issue of debt securities, (b) the lending of
portfolio securities in accordance with applicable
guidelines established by the SEC and any guidelines
established by the Trust's Trustees, or (c) entry
into repurchase agreements with banks or
broker-dealers;
(vi) Borrow amounts in excess of 20% 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 or except in
connection with reverse repurchase agreements,
provided that the Fund maintains net asset coverage
of at least 300% for all borrowings;
(vii) 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;
(viii) 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;
(ix) 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; or
(x) 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, short sales, swap
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.
<PAGE>
ADDITIONAL RESTRICTIONS
Ivy International Strategic Bond 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) purchase or sell real estate limited partnership interests;
(ii) purchase or sell interests in oil, gas and mineral leases (other
than securities of companies that invest in or sponsor such
programs);
(iii) invest more than 15% of its net assets taken at market value at
the time of the 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 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 or to other factors, is liquid; or
(iv) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and
except that the Fund may purchase shares of other investment
companies subject to such restrictions as may be imposed by the
Investment Company Act of 1940 (the "1940 Act") and rules
thereunder.
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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company.
As a result, the value of common stock rises and falls with a
company's success or failure. The market value of common stock
can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger
companies.
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. 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. 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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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 by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets 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.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. 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.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
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 each Fund to retain or dispose of such security. However, should any
individual bond held by any Fund be downgraded below a rating of C, IMI
currently intends to dispose of such bond based on then existing market
conditions.
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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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
representing 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 each Fund on a
current basis, but is in effect compounded, the value of the 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 may use 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 such Fund's assets. In either instance, each Fund will
maintain in a segregated account with its Custodian cash or liquid securities
equal (on a daily market-to-market basis) to the amount of its commitment to
purchase the underlying securities.
ILLIQUID SECURITIES
The Funds 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 the policy of
each Fund 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).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"), Global Depository Shares
("GDSs") and related depository instruments, 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 Fund's domestic investments.
Although IMI intends to invest each 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 the 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 the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
Each 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 each 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 each 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 each 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 each 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 each 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
each 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
each Fund's cash and securities, each 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 SOVEREIGN DEBT OBLIGATIONS
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 it debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt (including the Funds) may be request to participate in
the rescheduling of such debt and to extend further loans to governmental
entities. There is no bankruptcy proceeding by which sovereign debt on which
governmental entities have defaulted may be collected in whole or in part.
BRADY BONDS
Ivy International Strategic Bond Fund may invest in Brady Bonds, which
are securities created through the exchange of existing commercial bank loans to
public and private entities in certain emerging markets for new bonds in
connection with debt restructurings under a debt restructuring plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the `Brady Plan").
Brady Plan debt restructurings have been implemented to date in Argentina,
Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico,
Nigeria, Peru, the Philippines, Poland, Uruguay, and Venezuela.
Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar) and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds, with respect
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Ivy International Strategic Bond Fund may invest in fixed- and
floating-rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in most
instances to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans ("Assignments") from third parties.
Participations typically will result in the Fund having a contractual
relationship only with the Lender and not with the borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
the Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Fund will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the Adviser
to be creditworthy.
When the Fund purchases Assignments from Lenders, it will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.
The Fund may have difficulty disposing of Assignments and
Participation. Because no liquid market for these obligations typically exists,
the Fund anticipates that these obligations could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market will
have an adverse effect on the Fund's ability to dispose of particular
Assignments or Participations when necessary to meet the Fund's liquidity needs
or in response to a specific economic event, such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
Assignments and Participations may also make it more difficult for the Fund to
assign a value to those securities for purposes of valuing the Fund's portfolio
and calculating its net asset value.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, each Fund may 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 each of these Funds as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and each Fund may incur costs in connection
with conversions between various currencies. Although each Fund's custodian
values the Fund's assets daily in terms of U.S. dollars, each Fund does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. Each 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. Each 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 each Fund normally will be invested in both U.S. and foreign
securities markets, changes in each Fund's share price may have a low
correlation with movements in U.S. markets. Each Fund's share price will reflect
the movements of 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 each 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 each Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to a Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 the Funds may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each of these Funds 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 the Fund. An imperfect correlation of this
type may prevent the Fund from achieving the intended hedge or expose a Fund to
the risk of currency exchange loss.
The Funds may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
The Funds may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
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, each 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. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI 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.
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, each
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. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 a Fund. Each 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.
COMMERCIAL PAPER.
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each 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.
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 each Fund's borrowings will be fixed, a Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
SHORT SALES
Ivy International Strategic Bond Fund may engage in short sale
transactions in fixed-income securities. Short selling involves the sale of
borrowed securities. At the time a short sale is effected, the Fund incurs an
obligation to replace the security borrowed at whatever its price may be at the
time that the Fund purchases it for delivery to the lender. When a short sale
transaction is closed out by delivery of the securities, any gain or loss on the
transaction is taxable as a short-term capital gain or loss. Until the security
is replaced, the Fund is required to pay to the lender amounts equal to any
dividends or interest which accrue during the period of the loan. To borrow the
security, the Fund also may be required to pay a premium, which would increase
the cost of the security sold. Until the Fund replaces a borrowed security in
connection with a short sale, the Fund will: (a) maintain daily a segregated
account containing cash or liquid securities, at such level that (i) the amount
deposited in the segregated account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short; or (b) otherwise cover its short position.
Since short selling can result in profits when bond prices generally
decline, Ivy International Strategic Bond Fund in this manner, can, to a certain
extent, hedge the market risk to the value of its other investments and protect
its equity in a declining market. However, the Fund could, at any given time,
suffer both a loss on the purchase or retention of one security, if that
security should decline in value, and a loss on a short sale of another
security, if the security sold short should increase in value. If the Fund sells
short one security to hedge a position in a similar security, the Fund could
experience a loss due to an increase in the price of the security sold short
resulting from an incorrectly perceived correlation between the two securities
or a correlation not present at the time of the short sale transaction.
Moreover, to the extent that in a generally rising market the Fund maintains
short positions in securities rising with the market, the net asset value of the
Fund would be expected to increase to a lesser extent than the net asset value
of an investment company that does not engage in short sales.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would negotiate directly with the counterparty.
Each 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 a 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."
Each 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 the 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 the 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 each 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, the 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. Each 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. Each of these
Funds 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 for the options).
In view of the investment objectives of these Funds, each 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 "covered" call option means generally that so long as a 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 each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each 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 the 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. The Funds may purchase put
options on underlying securities owned by the Funds as a defensive technique in
order to protect against an anticipated decline in the value of the securities.
Each of the Funds, 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
the 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 any Fund for
leverage purposes.
Each Fund may also purchase put options on underlying securities that
they own 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, the 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. The Funds may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. The Funds 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. Call
options on indices are similar to call 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 the
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 the
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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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, the 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. 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. An OTC
counterparty may fail to deliver or to pay, as the case may be. 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.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in a Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of their portfolio turnover and brokerage commissions. See
"Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each 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, that Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, each 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, each 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, each Fund will maintain 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (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, or, if lower, the Fund may hold securities to
cover the difference.
INTEREST RATE FUTURES CONTRACTS. 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,
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 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.
Each Fund may sell interest rate futures contracts in order to hedge
their portfolio securities whose value may be sensitive to changes in interest
rates. In addition, each 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 loan) whose value may be sensitive to change in interests rates.
Each Fund could sell interest rate futures contracts in anticipation of or doing
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. If such purchases are made, an
equivalent amount of interest rate futures contracts will be terminated by
offsetting sales. Each Fund may also maintain the futures contract as a
substitute for the underlying securities.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. Each Fund may also purchase
and write put and call options on interest rate futures contracts which are
traded on a U.S. exchange or board of trade and sell or purchase such options to
terminate an existing position. 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 would enable each 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 in
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 particular Fund's portfolio securities
which have been hedged. However, if after a 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.
SWAPS, CAPS, FLOORS AND COLLARS. Ivy International Strategic Bond Fund
may enter into interest rate, currency, credit and index swaps and the purchase
or sale of related caps, floors and collars. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. Credit swaps involve the exchange by the Fund with a
counterparty of their respective committments to pay or receive the difference
in interest rates between a firm or country's rate and the risk free rate. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rate or values.
Ivy International Strategic Bond Fund may enter credit protection swap
arrangements involving the sale by the Fund of a put option on a debt security
which is exercisable by the buyer upon certain events, such as a default by the
referenced creditor on the underlying debt or a bankruptcy event of the
creditor.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, IMI and the
Fund believe such obligations do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. The Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction, the unsecured
long-term debt of the counterparty, combined with any credit enhancements, is
rated at least A by S&P or Moody's or has an equivalent rating from a nationally
recognized statistical rating organization or is determined to be of equivalent
credit quality by IMI. If there is a default by the counterparty, the Fund may
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. The Funds 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.
The Funds 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 each 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. Each 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.
Each Fund will only enter into 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. Each 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. 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 a
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
Ivy International Strategic Bond Fund may enter into securities index
futures contracts as an efficient means of regulating the Fund's exposure to the
equity markets. The 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 the 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, the
Fund will gain $2,000 (500 units x gain of $4). If the 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. Ivy International Strategic Bond
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.
The 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, the 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although the 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,
the 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, the 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.
The 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. The
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, the Fund will maintain 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, the 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 an index futures contract, the Fund will maintain with its
Custodian (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, the 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
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. Each 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.
PORTFOLIO TURNOVER
The Funds purchase 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, each
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 the 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.
Each 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 the Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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 each 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.
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"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Asia Pacific Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund II, Ivy International Fund, Ivy International Small Companies
Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US
Blue Chip Fund and Ivy US Emerging Growth Fund. IMI also provides business
management services to Ivy Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account 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 each 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 each Fund's Custodian and
monitor the services it provides to the 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 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 each 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. During the fiscal years
ended December 31, 1996, 1997 and 1998, Ivy Bond Fund paid IMI fees of $781,647,
$800,555, and $1,042,273, respectively. During the same periods, IMI reimbursed
Fund expenses in the amount of $0, $0, and $0, respectively.
Ivy International Strategic Bond Fund pays IMI a monthly fee for
providing business management and investment advisory services at an annual rate
of 0.75% of the Fund's average net assets.
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 Bond 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 the
Fund's expenses and increase its yield.
IMI currently limits Ivy International Strategic Bond 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 1.25% of the Fund's average net
assets, which may lower the Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, 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 each 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 the shareholders, continuance (or adoption)
shall be effected with respect to each Fund only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
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 each 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.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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.
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 each
Fund. The Distribution Agreement may be terminated with respect to each Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
that Fund or by a Fund by vote of either a majority of the outstanding voting
securities of that 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.
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. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each 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 each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each 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 that 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, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee for each Fund is based upon the net assets of the 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.
During the fiscal year ended December 31, 1998, Ivy Bond Fund paid
MIMI $102,796 under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, Ivy Bond Fund pays a monthly
fee at an annual rate of $20.75 per open Class A, Class B, Class C and Advisor
Class account. Ivy International Strategic Bond Fund pays a monthly fee at an
annual rate of $20.00 for each Class A, Class B, Class C and Advisor Class
account. Each Fund pays a monthly fee at an annual rate of $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 Ivy Bond Fund for the fiscal year ended December 31, 1998 totaled
$260,700. Certain broker-dealers that maintain shareholder accounts with each
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., 0.10%) 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 an annual rate of 0.10% of the
Fund's average daily net asset value of its Class A, Class B, Class C, and
Advisor Class Shares, and an annual rate of 0.01% of its average daily net
assets for Class I. Such fees for the fiscal year ended December 31, 1998 for
Ivy Bond Fund totaled $158,455.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
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 each
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 each 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, 1996, 1997 and 1998, Ivy
Bond Fund paid brokerage commissions of $398, $1,361, and $0, respectively.
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 deems to be a desirable investment for the Fund.
While no minimum has been established, it is expected that each 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 any Fund shares with
securities and may discontinue accepting securities as payment for any 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 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.
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 any 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 nineteen 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund, as well as Class I shares
for Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy International Strategic Bond Fund and
Ivy US Blue Chip 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 each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each 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 that 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 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 a 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.
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.
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 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.
SPECIAL 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 IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Developing Nations Fund,
Ivy European Opportunities 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 II, Ivy International Fund, Ivy
International Small Companies Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund,
Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund
(the other sixteen series of the Trust). (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 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 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 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.
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 share. The minimum value of Advisor Class shares which may
be exchanged into an Ivy fund in which shares are not already held is $10,000.
No exchange out of any 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 that Fund to less than $10,000.
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 account under the
plan, 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 fund 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 each Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of each Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
SYSTEMATIC WITHDRAWAL PLAN
An Advisor Class 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. 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 $250 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 of each 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.
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 the Funds.
The Trust may redeem those accounts of Advisor Class shareholders who
have maintained an investment of less than $10,000 in any 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 each 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, each Fund may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
NET ASSET VALUE
The net asset value per share of each 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 the Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among that 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 each 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
any Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), 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 Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Fund does not price its shares, each Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares. The sale of each 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 a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each 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 any Fund.
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 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, 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 a 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.
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 that Fund. If a 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 each 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 the Funds may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
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 each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by the Funds, 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, each 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 each 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 each 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
The Funds 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. The 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.
Each 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 each 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 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. Each 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. Each 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.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable 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 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 shareholders as long-term
capital gains 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 any 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, will be long-term or
short-term, 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 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.
FOREIGN WITHHOLDING TAXES
Income received by any 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, that Fund will
be eligible and may elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the 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 the 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 each Fund's taxable year whether the foreign taxes
paid by that 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 the
Fund's income flows through to its shareholders. With respect to each 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 a 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. In addition, if a Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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 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.
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 each 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 any Fund.
PERFORMANCE INFORMATION
Performance information for each Fund 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 the
Funds' 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 each 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
indicate future performance.
YIELD
Quotations of yield for a specific class of shares of each 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 net asset value per share 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 net asset value per share on the last day
of the period.
The yield for Advisor Class shares of Ivy Bond Fund for the 30-day
period ended December 31, 1998 was (0.72)%.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of each 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 each Fund, it is assumed that
all dividends and capital gains distributions made by that Fund are reinvested
at net asset value in additional Advisor Class shares during the designated
period. Standardized Return quotations for each Fund 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%.
Each 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").
In determining the average annual total return for a specific class of
shares of the 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 the 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 Fund.
The Standardized Return for Ivy Bond Fund Advisor Class shares for
the period from the date Advisor Class shares were first offered (January 1,
1998) through December 31, 1998 was (0.30)%.
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's
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.
The Cumulative Total Return for Ivy Bond Fund Advisor Class Shares
for the period from the date Advisor Class shares were first offered (January 1,
1998) through December 31, 1998 was (0.30)%.
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 each Fund will vary from time to time
depending on market conditions, the composition of the Fund's portfolio and
operating expenses of each 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 each Fund's shares and the risks associated with each 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.
Each 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
Ivy Bond Fund's Portfolio of Investments as of December 31, 1998,
Statement of Assets and Liabilities as of December 31, 1998, Statement of
Operations for the fiscal year ended December 31, 1998, Statement of Changes in
Net Assets for the fiscal year ended December 31, 1998, Financial Highlights,
Notes to Financial Statements, and Report of Independent Accountants, which are
included in Ivy Bond Fund's December 31, 1998 Annual Report to shareholders, are
incorporated by reference into this SAI. Ivy International Strategic Bond Fund's
Statement of Assets and Liabilities as of April 28, 1999 and the notes thereto
are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 28, 1999
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY INTERNATIONAL STRATEGIC BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
ASSETS
Cash.....................................................$ 1,000,040
Prepaid offering cost.................................... 33,000
Prepaid blue sky fees.................................... 24,000
Total Assets......................................... 1,057,040
------------
LIABILITIES
Due to affiliate......................................... 57,000
------------
NET ASSETS....................................................$ 1,000,040
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding).......................$ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 95.25)*..............................$ 10.50
=======
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding).......................$ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding)...................... $ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)........................$ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($1,000,000.00 / 100,000 shares outstanding).......... $10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $1,000,040
=======
<PAGE>
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 5%.
*** Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge, up to a maximum of 1%.
The accompanying notes are an integral part of the
financial statement.
IVY INTERNATIONAL STRATEGIC BOND FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
APRIL 28, 1999
1. ORGANIZATION: Ivy International Strategic Bond Fund is a non-diversified
series of shares of Ivy Fund. The shares of beneficial interest are assigned no
par value and an unlimited number of shares of Class A, Class B, Class C, Class
I and Advisor Class are authorized. Ivy Fund was organized as a Massachusetts
business trust under a Declaration of Trust dated December 21, 1983 and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund will commence operations on May 3, 1999. As of the date of this
report, operations have been limited to organizational matters and the issuance
of initial shares to Mackenzie Investment Management Inc. (MIMI).
2. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of $10,700,
comprised of $2,500 for auditing and $8,200 for legal. The full amount of
organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COST AND PREPAID BLUE SKY FEES: Offering cost, consisting of legal
fees, and blue sky fees will be amortized over a one year period beginning May
3, 1999, the date the Fund is expected to commence operations. Offering cost
and blue sky fees have been paid by MIMI and will be reimbursed by the Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly owned
subsidiary of MIMI, is the Manager and Investment Manager of the Fund. For the
current fiscal year, IMI contractually limits the Fund's total operating
expenses (excluding taxes, 12b-1 fees, brokerage commissions, interest,
litigation and indemnification expenses, and any other extraordinary expenses)
to an annual rate of 1.25% of its average net assets. For each of the following
nine years, IMI will ensure that these expenses do not exceed 2.50% of the
Fund's average net assets.
MIMI provides certain administrative, accounting and pricing services for the
Fund.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund.
Officers of Ivy Fund are officers and/or employees of MIMI, IMI, IMDI and IMSC.
Such individuals are not compensated by the Fund for services in their capacity
as officers of Ivy Fund. Trustees of Ivy Fund who are not affiliated with MIMI
or IMI receive compensation from the Fund. No such amounts have been incurred as
of April 28, 1999.
<PAGE>
IVY INTERNATIONAL FUND
a series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of nineteen fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B, C and I shares of Ivy International Fund (the "Fund"). The other
eighteen portfolios of the Trust are described in separate prospectuses and
SAIs.
This SAI is not a prospectus and should be read in conjunction with
the prospectus for the Fund dated May 3, 1999 (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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION.......................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS...............................1
COMMON STOCKS....................................................2
CONVERTIBLE SECURITIES...........................................2
DEBT SECURITIES..................................................3
IN GENERAL..............................................3
INVESTMENT-GRADE DEBT SECURITIES........................3
U.S. GOVERNMENT SECURITIES..............................3
FIRM COMMITMENT AGREEMENTS AND "WHEN-ISSUED"
SECURITIES............................................4
ILLIQUID SECURITIES..............................................4
FOREIGN SECURITIES...............................................5
DEPOSITORY RECEIPTS..............................................6
EMERGING MARKETS.................................................6
FOREIGN CURRENCIES...............................................7
FOREIGN CURRENCY EXCHANGE TRANSACTIONS...........................8
OTHER INVESTMENT COMPANIES.......................................9
REPURCHASE AGREEMENTS............................................9
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS................9
COMMERCIAL PAPER................................................10
BORROWING.......................................................10
WARRANTS........................................................10
OPTIONS TRANSACTIONS............................................10
IN GENERAL.............................................10
WRITING OPTIONS ON INDIVIDUAL SECURITIES...............11
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES............12
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES...12
RISKS OF OPTIONS TRANSACTIONS..........................13
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..............14
IN GENERAL.............................................14
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS.15
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS......16
SECURITIES INDEX FUTURES CONTRACTS..............................17
RISKS OF SECURITIES INDEX FUTURES......................17
COMBINED TRANSACTIONS..................................18
INVESTMENT RESTRICTIONS..................................................18
PORTFOLIO TURNOVER.......................................................20
TRUSTEES AND OFFICERS....................................................21
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI...............21
INVESTMENT ADVISORY AND OTHER SERVICES...................................21
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES............21
SUBADVISORY CONTRACT...................................22
DISTRIBUTION SERVICES...........................................23
RULE 18F-3 PLAN........................................24
RULE 12B-1 DISTRIBUTION PLANS..........................24
CUSTODIAN.......................................................26
FUND ACCOUNTING SERVICES........................................26
TRANSFER AGENT AND DIVIDEND PAYING AGENT........................27
ADMINISTRATOR...................................................27
AUDITORS........................................................27
BROKERAGE ALLOCATION.....................................................27
CAPITALIZATION AND VOTING RIGHTS.........................................28
SPECIAL RIGHTS AND PRIVILEGES............................................30
AUTOMATIC INVESTMENT METHOD.....................................30
EXCHANGE OF SHARES..............................................30
INITIAL SALES CHARGE SHARES............................30
CONTINGENT DEFERRED SALES CHARGE SHARES................31
CLASS A................................................31
CLASS B................................................31
CLASS C................................................32
CLASS I................................................32
ALL CLASSES............................................32
LETTER OF INTENT................................................33
RETIREMENT PLANS................................................33
INDIVIDUAL RETIREMENT ACCOUNTS.........................34
ROTH IRAS..............................................35
QUALIFIED PLANS........................................35
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7) ACCOUNT").......36
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS...............36
SIMPLE PLANS...........................................37
REINVESTMENT PRIVILEGE..........................................37
RIGHTS OF ACCUMULATION..........................................37
SYSTEMATIC WITHDRAWAL PLAN......................................37
GROUP SYSTEMATIC INVESTMENT PROGRAM.............................38
REDEMPTIONS..............................................................39
CONVERSION OF CLASS B SHARES.............................................40
NET ASSET VALUE..........................................................40
TAXATION 42
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.........42
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES..........44
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES..............44
DEBT SECURITIES ACQUIRED AT A DISCOUNT..........................44
DISTRIBUTIONS...................................................45
DISPOSITION OF SHARES...........................................46
FOREIGN WITHHOLDING TAXES.......................................46
BACKUP WITHHOLDING..............................................47
PERFORMANCE INFORMATION..................................................47
AVERAGE ANNUAL TOTAL RETURN............................48
CUMULATIVE TOTAL RETURN................................50
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION..51
FINANCIAL STATEMENTS.....................................................52
APPENDIX A...............................................................53
<PAGE>
GENERAL INFORMATION
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 Fund commenced operations (Class A
shares) on April 21, 1986. The inception date for Class B and Class I shares was
October 23, 1993. The inception date for Class C shares was April 30, 1996.
Descriptions in this Statement of a particular investment practice
or technique in which the Fund may engage or a financial instrument which the
Fund may purchase are meant to describe the spectrum of investments that IMI, in
its discretion, might, but is not required to, use in managing the Fund's
portfolio assets. IMI may, in its discretion, at any time employ such practice,
technique or instrument for one or more funds but not for all funds advised by
it. Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case the Fund would not use them. Certain practices,
techniques, or instruments may not be principal activities of the Fund but, to
the extent employed, could from time to time have a material impact on the
Fund's performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Additional information regarding the
characteristics and risks associated with the Fund's investment techniques is
set forth below.
Sales of shares of the 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,
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.
COMMON STOCKS
Common stock can be issued by companies to raise cash; all common stock
shares represent a proportionate ownership interest in a company. As a result,
the value of common stock rises and falls with a company's success or failure.
The market value of common stock can fluctuate significantly, with smaller
companies being particularly susceptible to price swings. Transaction costs in
smaller company stocks may also be higher than those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which the 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. 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. 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 Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("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). The 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.
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 prepayment tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayments, 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.
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. The 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.
ILLIQUID SECURITIES
The 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 the Fund. It is the 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 the
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, the Fund may be required to bear all or part of the registration
expenses. The 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).
FOREIGN SECURITIES
The securities of foreign issuers in which the Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"), Global Depository Shares
("GDSs") and related depository instruments, 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 Fund's domestic investments.
Although IMI 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 the Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, the Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund because of subsequent
declines in the value of the portfolio security or, if the Fund has entered into
a contract to sell the security, in possible liability to the purchaser. It may
be more difficult for the 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 the Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities are depository
instruments, the issuance of which is typically administered by a U.S. or
foreign bank or trust company. These instruments 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
The 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 the 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 the 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 the 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, the 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 the 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
the 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
the Fund's cash and securities, the 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. Moreover, the Fund may 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 the 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 Fund's custodian values the
Fund's assets daily in terms of U.S. dollars, the Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
The 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 the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The 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 the 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. The Fund's share price will reflect the
movements of 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 the 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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Fund may enter into forward foreign currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates in the
purchase and sale of securities. 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 the Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for the Fund than if it had not engaged in such transactions.
Moreover, there may be an imperfect correlation between the Fund's portfolio
holdings of securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect correlation of this type may
prevent the Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
The Fund may purchase currency forwards and combine such purchases with
sufficient cash or short-term securities to create unleveraged substitutes for
investments in foreign markets when deemed advantageous. The Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transactions
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
OTHER INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, the Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). The Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts 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. Under
guidelines approved by the Board, the 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. The Fund will enter into repurchase agreements only with
banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, the 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.
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, the
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. The Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance 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 association 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 Fund. The 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.
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 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.
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). Although the principal
of the 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.
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 the 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 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 a U.S. exchange-traded 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
canceled 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would need to negotiate this result with the counterparty to the
transaction.
The 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 the 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 the Fund, are taxable as ordinary income. See
"Taxation."
The 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 the 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 the 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 the Fund and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization guarantee. When the 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, the 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. The 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. The 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 the 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 "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 the
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. The Fund
may purchase call options on individual securities only to effect a "closing
purchase transaction."
As the writer of a call option, the 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 the 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. The 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.
The 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 the Fund must pay. These costs will reduce any profit the
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 the Fund for leverage purposes.
The 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, the 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. The 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. The Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. The 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. Call
options on indices are similar to call 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 the 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 the
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 the
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 risks. During the option period, the covered call writer has,
in return for the premium on the option, 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 a U.S. 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 the 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, the 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 the
Fund seeks to close out an option position. Furthermore, if trading restrictions
or suspensions are imposed on the options markets, the 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. Transfer of an OTC option is usually prohibited absent the consent of
the original counterparty. There is no assurance that the Fund will be able to
close out an OTC option position at a favorable price prior to its expiration.
An OTC counterparty may fail to deliver or to pay, as the case may be. In the
event of insolvency of the counterparty, the Fund might be unable to close out
an OTC option position at any time prior to its expiration. Although the 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.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. 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 U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
The Fund's options activities also may have an impact upon the level of
its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
The Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. The 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 the Fund, the Fund is required to deposit with its
custodian (or broker, if legally permitted) 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 the 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.
The Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. 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, the 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, the Fund will maintain 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,
the 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, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, the 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, the 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 the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, the 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, the 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 the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, the Fund will maintain
with its Custodian (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, the 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, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. The 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.
The 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.
The Fund will only enter into 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. The 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. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in the 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 the 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
The Fund may enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to the equity markets. The
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 the 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, the Fund will gain $2,000 (500 units x
gain of $4). If the 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. The 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.
The 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, the 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 the Fund's portfolio diverges from the composition of the hedging
instrument.
Although the 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,
the 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, the 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.
The 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. The
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, the Fund will maintain 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, the 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 an index futures contract, the Fund will maintain with its
Custodian (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, the 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
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. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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 the 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
The Fund's investment objectives as set forth in the "Summary" section
of the Prospectus, 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 of the outstanding voting shares of the Fund. 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) 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;
(vii) purchase or sell real estate or commodities
and commodity contracts;
(viii) 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;
(ix) 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;
(x) 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);
(xi) 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); or
(xii) purchase the securities of any other open-end
investment company, except as part of a plan of
merger or consolidation.
The Fund will continue to interpret fundamental investment restriction
(vii) 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.
Under the Investment Company Act of 1940, the Fund is permitted,
subject to its 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.
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 in companies for the purpose of exercising
control of management; or
(iii) 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.
PORTFOLIO TURNOVER
The 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, the
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 the Fund is
known as "portfolio turnover" and may involve the payment by the 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.
The 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 the Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (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: 75 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: 78 (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: 73
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: 52 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: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 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 Mackenzie
700 South Federal Hwy. And Investment Management, Inc. (1996-
Suite 300 President -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie
Age: 42 Investment Management, Inc. (1994-
[*Deemed to be an 1996); Senior Vice President and
"interested person" Treasurer of Mackenzie Investment
of the Trust, as defined Management, Inc. (1989-1994);
under the Senior Vice President and Director
1940 Act.] 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: 54 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).
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C> <C>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED ANNUAL ESTIMATED FROM TRUST AND FUND
NAME, FROM AS PART OF FUND ANNUAL BENEFITS COMPLEX PAID TO TRUSTEES
POSITION TRUST EXPENSES UPON RETIREMENT
John S. $18,000 N/A N/A $18,000
Anderegg, Jr.
(Trustee)
Paul H. $18,000 N/A N/A $18,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson
(Trustee and
President)
Stanley $18,000 N/A N/A $18,000
Channick
(Trustee)
Frank W. $18,000 N/A N/A $18,000
DeFriece, Jr.
(Trustee)
Roy J. $18,000 N/A N/A $18,000
Glauber
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $18,000 N/A N/A $18,000
Rosenthal
(Trustee)
Richard N. $18,000 N/A N/A $18,000
Silverman
(Trustee)
J. Brendan $17,000 N/A N/A $17,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/
Treasurer)
</TABLE>
<PAGE>
To the knowledge of the Trust, as of March 31, 1999, no shareholder
owned beneficially or of record 5% or more of any Fund's outstanding shares of
any class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of :
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 40,174.921
shares (16.51%), and Michael G. Landry, 211 S. Gordon Rd., Ft.
Lauderdale, FL 33301, owned of record 12,443.882 shares (5.11%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 1,397,567.620 shares
(13.02%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 218,003.027
shares (13.26%), and Resources Trust Company, PO Box 3865, Englewood, CO
80155-3865, owned of record 186,351.290 shares (11.33%);
Ivy Developing Nations Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (11.31%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 54,336.017 shares
(7.06%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd
Floor, Jacksonville, FL 32246, owned of record 41,198.769 shares (5.35%);
Ivy Global Natural Resources Fund, Carn & Co., Riggs Bank (TTEE) FBO
Care-Free Consolidated 401K Plan, PO Box 96211, Washington, DC 20090-6211, owned
of record 62,273.356 shares (29.71%), Carn & Co., Riggs Bank (TTEE) FBO Yazaki
Employee Savings & Retirement Plan, PO Box 96211, Washington, DC 20090-6211,
owned of record 22,533.136 shares (10.75%), and Mackenzie Investment Management
Inc., via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, FL 33432, owned of record 11,957.023 shares (5.70%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 99,948.978 shares (16.84%), Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
65,325.391 shares (11.01%), and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 31,922.542
shares (5.38%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
818,804.984 shares (34.10%);
Ivy International Fund, Charles Schwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 12,827,455.253 shares (35.28%),
and Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E, 3rd Floor,
Jacksonville, FL 32246, owned of record 6,083,813.996 shares (16.73%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 19,762.181 shares (20.88%), and Mackenzie Investment Management Inc., via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL
33432, owned of record 10,287.244 shares (10.87%).
Ivy Money Market Fund, Carn & Co., Riggs Bank (TTEE) FBO Plexus Corp
401K Plan, PO Box 96211, Washington, DC 20090-6211, owned of record
2,710,056.720 shares (13.19%), and Bear Stearns Securities Corp., 1 Metrotech
Center North, Brooklyn, NY 11201-3859, owned of record 1,432,318.960 shares
(6.97%).
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 37,553.145 shares (23.84%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,122.193 shares (17.22%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 45,710.848
shares (17.87%), and Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 19,471.113 shares (7.61%), and William A.
Maczko & Mildred E. Helm Maczko, 2100 S. Ocean Ln., #1412, Ft. Lauderdale, FL
33316, owned of record 14,174.070 shares (5.54%);
Ivy US Blue Chip Fund, Helen L. Medvin, 4712 Michael Ave., North
Olmsted, OH 44070, owned of record 10,253.846 shares (7.12%), Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 8,986.371 shares (6.24%), and Janney Montgomery Scott Inc.,
Estate of David Craig, 1801 Market Street, Philadelphia, PA 19103-1675, owned of
record 8,880.995 shares (6.17%).
Ivy US Emerging Growth Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record
86,774.211 shares (5.08%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 141,298.083
shares (35.22%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 12,199,384.716
shares (48.92%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 107,725.641
shares (11.73%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
278,316.028 shares (28.37%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 68,719.447 shares
(11.93%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
83,599.984 shares (38.05%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 40,990.672 shares (8.13%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 24,939.375 shares
(8.96%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
263,081.752 shares (15.31%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
4,986,169.823 shares (60.62%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 5,678,407.729
shares (45.59%).
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 24,340.066 shares (23.40%), PaineWebber, FBO B Carmage Walls Trust #10,
FBO Lissa Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston, TX 77242,
owned of record 5,880.313 shares (5.65%), and PaineWebber, FBO B Carmage Walls
Trust #10, FBO Cooper Walls Trust and Cooper Walls TTEE, PO Box 42828, Houston,
TX 77242, owned of record 5,760.640 shares (5.53%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 66,847.392
shares (22.86%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 46,359.136
shares (29.47%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 74,760.802
shares (18.62%), and Parker Hunter Incorporated, FBO Robert Crisci and Kathy
Crisci, PO Box 7629, 3525 Ellwood Road, New Castle, PA 16107-7629, owned of
record 24,779.090 shares (6.17%).
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
335,426.771 shares (21.10%);
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 19,237.215
shares (5.33%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 725,233.869 shares
(74.69%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 30,474.251
shares (27.72%), and IBT, (custodian) FBO Roy O. Derminer, 2236 Abbottwoods Ln.,
Orange City, FL 32763, owned of record 8,275.708 shares (7.52%);
Ivy Developing Nations Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 48,103,553
shares (11.99%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,585.276 shares
(19.35%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 3,909.907 shares (11.48%), Robert W.
Baird & Co. Inc., 777 East Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 3,436.408 shares (10.09%), IBT, (custodian) FBO Mattie A. Allen, 755
Selma Pl., San Diego, CA 92114-1711, owned of record 3,095.552 shares (9.09%),
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record
2,436.584 shares (7.15%), and PaineWebber, (custodian) FBO Robert D.
Cuthbertson, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 1,705.476
shares (5.01%);
Ivy Global Natural Resources Fund, Raymond James & Assoc. Inc.,
(custodian) Raymond W. Simmons, 6296 104th Avenue, Pinellas Park, FL 33782,
owned of record 981.281 shares (19.43%), Raymond James & Assoc. Inc.,
(custodian) Diversified Dental P/S, FBO Al Pollock, 10641 1st Street E., Suite
204, Treasure Island, FL 33706, owned of record 910.166 shares (18.02%), Robert
W. Baird & Co. Inc., 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5391, owned of
record 613.622 shares (12.15%), Robert W. Baird & Co. Inc., 777 E. Wisconsin
Avenue, Milwaukee, WI 53202-5391, owned of record 550.722 shares (10.90%), Nancy
J. Cleare, 9381 US Hwy. 19 N, Pinellas Park, FL 33782, owned of record 541.597
shares (10.72%), Resources Trust Co., (custodian) FBO Jon K. Loessin, PO Box
5900, Denver, CO 80217, owned of record 535.023 shares (10.59%), Ester C.
Wickes, 19 Fawn Hill Rd., Tuxedo, NY 10987, owned of record 350.772 shares
(6.94%), and IBT, (custodian) FBO Salvatore Disalvo, 311 Bridle Path Lane,
Annapolis, MD 21403-1638, owned of record 299.993 shares (5.94%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 38,011.661 shares (11.30%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 7,477.571 shares
(47.23%), IBT, (custodian) FBO Joseph L. Wright, 32211 Pierce Street, Garden
City, MI 48135, owned of record 3,938.282 shares (24.87%), PaineWebber, FBO
Cynthia N. Young, PO Box 3321, Weehawken, NJ 07087-8154, owned of record 853.551
shares (5.39%), and Martin S. Sawyer & Ruth C. Sawyer, 5910 Wilson Blvd., #413,
Arlington, VA 22205, owned of record 844.906 shares (5.33%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 11,534.267
shares (29.37%), Anthony L. Bassano & Marie E. Bassano, 8934 Bari Court, Port
Richie, FL 34668, owned of record 3,203.100 shares (8.15%), IBT, (custodian) FBO
Vytautas Snieckus, 1250 E 276th Street, Euclid, OH 44132, owned of record
2,645.907 shares (6.73%), PaineWebber, (custodian) FBO Patricia Cramer Russell,
PO Box 3321, Weehawken, NJ 07087-8154, owned of record 2,191.410 shares (5.58%),
IBT, (custodian) FBO Kevin D. Thistle, 1017 Glencrest Court, Saulkville, WI
53080, owned of record 2,130.626 shares (5.42%), and IBT, (custodian) FBO Carol
E. Greivell, 985 N Broadway, #67, Depere, WI 54115, owned of record 2,106.814
shares (5.36%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record
2,908,557.453 shares (74.01%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 2,189,094.234
shares (64.38%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of
record 87,014.649 shares (90.31%);
Ivy Money Market Fund, PaineWebber, FBO Bruce Blank, PO Box 3321,
Weehawken, NJ 07087-8154, owned of record 103,905.380 shares (17.65%), IBT
(custodian) FBO, Marcelette V. Manning, 1371 Mt. View Lane, Chula Vista, CA
91911, owned of record 65,194.630 shares (11.07%), IBT (custodian) FBO Diana
Rooney, 2441 S. 9th St., El Centro, CA 92243, owned of record 62,822.810 shares
(10.67%), Robert J. Laws & Katherine A. Laws, PO Box 723, Ramona, CA 92065,
owned of record 42,920.450 shares (7.29%), IBT (custodian) FBO Betty J. Carson,
1987 Higgins Lane, El Centro, CA 92243, owned of record 39,398.780 shares
(6.69%), Paul M. Benard, 40 Arrowhead Farm Road, Boxford, MA 01921, owned of
record 33,488.010 shares (5.68%), Diane C. Benard, 40 Arrowhead Farm Road,
Boxford, MA 01921, owned of record 33,488.010 shares (5.68%), and PaineWebber,
FBO Kathleen L. Diller, PO Box 3321, Weehawken, NJ 07087-8154, owned of record
30,238.920 shares (5.13%).
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 26,948.668
shares (44.12%), Resources Trust Company, FBO Terry K. Ramnanan, PO Box 5900,
Denver, CO 80217, owned of record 14,652.015 shares (23.99%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 4,663.657 shares (7.63%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 10,956.813
shares (58.18%), Interstate/Johnson Lane, Interstate Tower, PO Box 1220,
Charlotte, NC 28201-1220, owned of record 2,617.801 shares (13.90%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 2,318.301 shares (12.31%), Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (6.02%), and Smith Barney Inc., 388 Greenwich Street,
New York, NY 10013, owned of record 966.121 shares (5.13%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 8,485.693
shares (10.18%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 6,066.012 shares (7.27%), IBT,
(custodian) FBO Roy O. Derminer, 2236 Abbottwoods LN, Orange City, FL 32763,
owned of record 4,517.953 shares (5.42%), and Donaldson Lufkin Jenrette
Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of
record 4,412.541 shares (5.29%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32246, owned of record 96,481.220
shares (30.56%);
CLASS I
Of the outstanding Class I shares of:
Ivy International Fund, The John E. Fetzer Institute Inc., 9292 W KL
Ave., Kalamazoo, MI 49009, owned of record 727,066.771 shares (19.12%), State
Street Bank, (TTEE) FBO Allison Engines, 200 Newport Ave., 7th Floor, North
Quincy, MA 02171, owned of record 292,309.556 shares (7.68%), Lynspen and
Company, PO Box 830804, Birmingham, AL 35283, owned of record 276,747.272 shares
(7.27%), and U A Local 447 Pension Trust Fund, 5841 Newman Ct., Sacramento, CA
95819, owned of record 240,427.057 shares (6.32%).
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Bond Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
13,944.569 shares (77.94%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 3,252.157 shares
(18.17%);
Ivy China Region Fund, Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,354.000 shares
(84.59%), and Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 192.447 shares (12.02%).
Ivy Developing Nations Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 14,362.134 shares (100%);
Ivy Global Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
30,007.844 shares (100%);
Ivy Global Science & Technology Fund, IBT, (custodian) FBO Deborah P.
Mason, 3406 Cypress Landing Dr., Valrico, FL 33594, owned of record 629.966
shares (36.59%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box
2052, Jersey City, NJ 07303-9998, owned of record 534.539 shares (31.04%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 418.586 shares (24.31%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 138.549 shares (8.04%);
Ivy Growth Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
16,572.658 shares (99.90%);
Ivy Growth with Income Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 25,118.240 shares (100%);
Ivy International Fund II, Charles Scwab & Co. Inc., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 7,913.113 shares (11.19%),
Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City,
NJ 07303-9998, owned of record 6,471.430 shares (9.15%), and Donaldson Lufkin
Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ 07303-9998,
owned of record 4,602.660 shares (6.50%);
Ivy Pan-Europe Fund, NFSC FEBO, C. William Ferris, Michael Landry/Keith
Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
3,424.319 shares (47.51%), Donaldson Lufkin Jenrette Securities Corporation
Inc., PO Box 2052, Jersey City, NJ 07303-9998, owned of record 1,191.422 shares
(16.53%), Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998, owned of record 947.119 shares (13.14%), Donaldson
Lufkin Jenrette Securities Corporation Inc., PO Box 2052, Jersey City, NJ
07303-9998, owned of record 653.595 shares (9.06%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104,owned of record 406.639
shares (5.64%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Via Mizner
Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, FL 33432,
owned of record 50,001.000 shares (80.05%), NFSC FEBO, C. William Ferris,
Michael Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 7,419.362 shares (11.87%), and Charles Scwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of record 3,678.690
shares (5.88%);
Ivy US Emerging Growth Fund, NFSC FEBO, C. William Ferris, Michael
Landry/Keith Carlson, 700 South Federal Highway, Boca Raton, FL 33432-6114,
owned of record 20,670.236 shares (84.78%), and Charles Schwab & Co. Inc., 101
Montgomery Street, San Francisco, CA 94104, owned of record 1,927.965 shares
(7.90%).
As of April 16, 1999, 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 each of the nineteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 3.93%, 1.94%, 1.19%, and 2.09%, respectively, of Ivy Asia
Pacific Fund Class A shares, Ivy Global Natural Resources Fund Class A shares,
Ivy Money Market Fund Class A shares, and Ivy South America Fund Class A shares,
respectively, as of that date.
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 and Business Conduct Policy
(the "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.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory services to
the Fund pursuant to a Business Management and Investment Advisory Agreement
(the "Agreement"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("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 whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises 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 Fund): Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund,
Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund.
IMI also provides business management services to Ivy Global Natural Resources
Fund.
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 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 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 that 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 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.
The Fund pays IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 1.00% of the Fund's average
net assets.
For the fiscal years ended December 31, 1996, 1997 and 1998, the
Fund paid IMI fees of $9,157,858, $22,898,279 and $26,278,962, 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.
The Agreement will continue in effect with respect to the Fund from
year to year, 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 the 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.
SUBADVISORY CONTRACT. The Trust and IMI, on behalf of the 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 the 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 the Fund's average net assets.
As compensation for advisory services rendered for the fiscal years ended
December 31, 1996, 1997 and 1998, IMI paid Northern Cross $5,494,715,
$13,738,967 and $15,139,876, 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 the 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
18-19, 1998, 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 March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of the Fund
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.
The Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
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 Fund's 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, 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.
During the fiscal year ended December 31, 1998, IMDI received from
sales of Class A shares of the Fund $457,543 in sales commissions, of which
$50,268 was retained after dealer allowances. During the fiscal year ended
December 31, 1998, IMDI received $2,081,051 in CDSCs on redemptions of Class B
shares of the Fund. During the fiscal year ended December 31, 1998, IMDI
received $67,501 in CDSCs on redemptions of Class C shares of the Fund.
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 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.
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. The
Board has adopted a Rule 18f-3 plan on behalf of the Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of the Fund
represent an equal pro rata interest in the 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 the Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) the Fund's Class B shares will convert
automatically into Class A shares of the 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 the
Fund, in accordance with Rule 12b-1 under the 1940 Act, separate Rule 12b-1
distribution plans pertaining to the Fund's 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 the Fund and its shareholders.
The Trustees of the Trust believe that the Plans should result in greater sales
and/or fewer redemptions of the Fund's shares, although it is impossible to know
for certain the level of sales and redemptions of the Fund's shares in the
absence of a Plan or under an alternative distribution arrangement.
Under each Plan, the 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. This
fee constitutes reimbursement to IMDI for service fees paid by IMDI. 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 the 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 Fund's Class B and Class C Plans, the 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. This
fee constitutes compensation to IMDI and is not dependent on expenses incurred
by IMDI. 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 Fund's 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 the 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 Independent Trustees 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 the 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 the 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.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii)in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1998, the Fund paid IMDI
$4,046,911 pursuant to its Class A plan. During the fiscal year ended December
31, 1998 the Fund paid IMDI $5,706,821 pursuant to its Class B plan. During the
fiscal year ended December 31, 1998, the Fund paid IMDI $1,716,708 pursuant to
its Class C plan.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class A shares of the Fund: advertising $168,977;
printing and mailing of prospectuses to persons other than current shareholders,
$378,037; compensation to dealers, $872,299; compensation to sales personnel
$5,345,357; seminars and meetings, $218,075; travel and entertainment, $426,555;
general and administrative, $3,058,638; telephone, $155,188; and occupancy and
equipment rental, $448,099.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class B shares of the Fund: advertising, $51,074;
printing and mailing of prospectuses to persons other than current shareholders,
$115,419; compensation to dealers, $3,195,137; compensation to sales personnel,
$1,616,138; seminars and meetings, $798,784; travel and entertainment, $128,908;
general and administrative, $925,228; telephone, $46,983; and occupancy and
equipment rental $135,879.
During the fiscal year ended December 31, 1998, IMDI expended the
following amounts in marketing Class C shares of the Fund: advertising, $15,328;
printing and mailing of prospectuses to persons other than current shareholders,
$34,747; compensation to dealers, $604,559; compensation to sales personnel,
$484,116; seminars and meetings, $151,140; travel and entertainment, $38,598;
general administrative, $277,069; telephone, $14,068; and occupancy and
equipment rental, $40,700.
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 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 the 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 the Fund's foreign securities. With
respect to the Fund, 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, MIMI provides certain
accounting and pricing services for the Fund. As compensation for those
services, the Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of the 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.
During the fiscal year ended December 31, 1998, the Fund paid MIMI
216,241 under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for the Fund. Under the Agreement, the Fund pays a monthly fee at
an annual rate of $20.00 for each open Class A, Class B and Class C account. The
Fund pays $10.25 per open Class I account. In addition, the 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, 1998 for the Fund totaled $3,577,962. 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., 0.10%) 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 the Fund. As compensation for these services,
the Fund (except with respect to its Class I shares) pays MIMI a monthly fee at
the annual rate of 0.10% of the Fund's average daily net assets. The Fund pays
MIMI a monthly fee at the annual rate of 0.01% of its average daily net assets
for Class I. Such fees for the fiscal year ended December 31, 1998 for the Fund
totaled $2,514,615.
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 the Fund.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, has been
selected as auditors for the Trust. The audit services performed by
PricewaterhouseCoopers LLP 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.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
and/or Northern Cross 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 and/or Northern Cross attempts to deal
directly with the principal market makers, except in those circumstances where
IMI and/or Northern Cross believes that a better price and execution are
available elsewhere.
IMI and/or Northern Cross 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 and/or Northern Cross in servicing all of its accounts. In addition, not all
of these services may be used by IMI and/or Northern Cross in connection with
the services it provides to the Fund or the Trust. IMI and/or Northern Cross 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 and/or Northern Cross will not, however, execute brokerage
transactions other than at the best price and execution.
During the fiscal years ended December 31, 1996, 1997 and 1998, the
Fund paid brokerage commissions of $1,709,643, $2,987,187 and $1,728,009,
respectively.
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 and/or Northern Cross 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 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 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.
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 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 nineteen 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 Money Market Fund and Class A,
Class B, Class C and Advisor Class shares for Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy European
Opportunities 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 II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund, as well as Class I shares
for the Fund, Ivy Bond Fund, Ivy European Opportunities Fund, Ivy Global Science
& Technology Fund, Ivy International Fund II, Ivy International Small Companies
Fund, Ivy International Strategic Bond Fund and Ivy US Blue Chip 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 the Fund, then the shareholders of the
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 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.
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.
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.
SPECIAL 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 IMDI. These funds are:
Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities 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 II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Money Market Fund,
Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US
Emerging Growth Fund (the other eighteen 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, the Fund suspended the offer of its shares to
new investors. Shares of the Fund are available for purchase only by existing
shareholders of the Fund. Once a shareholder's account has been liquidated, the
shareholder may not invest in the 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 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 the Fund have an
exchange privilege with other Ivy funds. 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.
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).
Each Fund may, from time to time, waive the initial sales charge on
its Class A shares sold to clients of The Legend Group and United Planners
Financial Services of America, Inc. This privilege will apply only to Class A
Shares of a Fund that are purchased using all or a portion of the proceeds
obtained by such clients through redemptions of shares of a mutual fund (other
than one of the Funds) on which a sales charge was paid (the "NAV transfer
privilege"). Purchases eligible for the NAV transfer privilege must be made with
in 60 days of redemption from the other fund, and the Class A shares purchased
are subject to a 1.00% CDSC on shares redeemed within the first year after
purchase. The NAV transfer privilege also applies to Fund shares purchased
directly by clients of such dealers as long as their accounts are linked to the
dealer's master account. The normal service fee, as described in the "Initial
Sales Charge Alternative - Class A Shares" section of the Prospectus, will be
paid to those dealers in connection with these purchases. IMDI may from time to
time pay a special cash incentive to The Legend Group or United Planners
Financial Services of America, Inc. in connection with sales of shares of a Fund
by its registered representative under the NAV transfer privilege. Additional
information on sales charge reductions or waivers may be obtained from IMDI at
the address listed on the cover of this Statement of Additional Information.
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 the
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 the 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 the 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 China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
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 1.00% 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 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). 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).
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.
LETTER OF INTENT
Reduced sales charges apply to initial investments in Class A shares of
the 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 the Fund. A Letter of Intent may
be submitted at the time of an initial purchase of Class A shares of the 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 Bond Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy
European Opportunities 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 II, Ivy International Fund, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy
South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth 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 account under the
plan, 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 fund 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 Fund 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 includable 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 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 distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAS: Shares of the Fund 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 (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher 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. 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 (as indexed). 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 the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of the 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 the 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 such funds
(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 all funds other than Ivy Bond
Fund; or $100,000 or more for Ivy Bond 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) 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 the 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 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 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 the 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 the 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 the 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.
REDEMPTIONS
Shares of the 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 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.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, 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.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of the Fund will
automatically convert to Class A shares of the 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 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.
NET ASSET VALUE
The net asset value per share of the 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 the Fund's aggregate net assets, receivables are valued at their
realizable amounts. The 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 last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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 Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) 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.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. 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 priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on 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 below). If events materially affecting the value of
the Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), 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 Fund's 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 number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on the
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since the Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Fund does not price its shares, the Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares. The sale of the 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.
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.
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.
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 the 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 the 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 the 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 the 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 the 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 the Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by the Fund.
In addition, losses realized by the 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 the Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by the Fund, which is taxed as ordinary income when
distributed to shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the 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, the 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 the 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 the 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 the Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The 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 the 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. The 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.
The Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. The 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, the 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 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
includable 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 shareholders as long-term
capital gains 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
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, will be long-term or
short-term, 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 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.
FOREIGN WITHHOLDING TAXES
Income received by the 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 the 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 the Fund's shareholders the
amount of foreign income and similar taxes paid by the 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 the 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 the 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 the Fund
makes the election described in the preceding paragraph, the source of the
Fund's income flows through to its shareholders. With respect to the 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 the 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. In addition, if the Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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
The 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 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.
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 the 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 the Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of the Fund 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 the 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 the 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 indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of the Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the 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 the Fund, it is assumed that
all dividends and capital gains distributions made by the 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
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 Fund 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%.
The 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 table summarizes the calculation of Standardized and
Non-Standardized Return for the Class A, Class B, Class C and Class I shares of
the Fund for the periods indicated. In determining the average annual total
return for a specific class of shares of the 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 the 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 Fund.
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December
31, 1998
1.17% 1.43% 5.46% 7.75%
Five years ended
December 31, 1998
9.37% 9.51% N/A 10.81%
Ten years ended
December 31, 1998
11.73% N/A N/A N/A
Inception [#] to ear
ended December 31,
1998[8]: 13.93% 10.82% 10.30% 11.77%
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December
31, 1998
7.34% 6.43% 6.46% 7.75%
Five years ended
December 31, 1998
10.67% 9.73% N/A 10.81%
Ten years ended
December 31, 1998
12.40% N/A N/A N/A
Inception [#] to year
ended December 31,
1998[8]: 14.46% 10.91% 10.30% 11.77%
- ------------------
[*] 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 redemption of Class B or C shares held for the period. Class I shares
are not subject to an initial sales change or to a CDSC; therefore, the
Non-Standardized Return Figures are identical to the Standarized Return Figures.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date for the Fund (Class A shares) was April 21,
1986. The inception date for Class B and Class I shares was October 23, 1993.
The inception date for Class C shares was April 30, 1996.
[1] The Standardized Return figures for the Class A shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
A shares for the period from inception through December 31, 1998 and the one,
five and ten year periods ended December 31, 1998 would have been 13.92%, 1.17%,
9.37%, and 11.72%, respectively.
[2] The Standardized Return figures for the Class B shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
B shares for the period from inception through December 31, 1998 and the one and
five year periods ended December 31, 1998 would have been 10.82%, 1.43% and
9.51%, respectively. Since the inception date for Class B shares was October 23,
1993, there were no Class B shares outstanding for the duration of the ten year
period ended December 31, 1998.
[3] The Standardized Return figures for the Class C shares reflect expense
reimbursement. Without expense reimbursement, the Standardized Return for Class
C shares for the period from inception through December 31, 1998 and the one
year period ended December 31, 1998 would have been 10.30% and 5.46%,
respectively. Since the inception date for Class C shares was April 30, 1996,
there were no Class C shares outstanding for the duration of the five and ten
year periods ended December 31, 1998.
[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 figures 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, 1998 and the
one, five and ten year periods ended December 31, 1998 would have been 14.45%,
7.34%, 10.67%, and 12.39%, 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 period from inception through December 31, 1998 and the
one and five year periods ended December 31, 1998 would have been 10.91%, 6.43%,
and 9.73%, respectively. Since the inception date for Class B shares was October
23, 1993, there were no Class B shares outstanding for the duration of the ten
year period ended December 31, 1998.
[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 period from inception through and the one year
period ended December 31, 1998 would have been 10.30% and 6.46%, respectively.
[8] 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 the Fund for a specified period. Cumulative total return quotations
reflect changes in the price of the 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 the 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.
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1998, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION [*]
Class A 1.17% 56.50% 203.25% 422.46%
Class B 1.43% 57.05% N/A 70.22%
Class C 5.46% N/A N/A 29.93%
Class I 7.75% N/A N/A 78.22%
The following table summarizes the calculation of Cumulative Total Return for
the periods indicated through December 31, 1998, assuming the maximum 5.75%
sales charge has not been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION [*]
Class A 7.34% 66.04% 221.75% 454.33%
Class B 6.43% 59.05% N/A 71.22%
Class C 6.46% N/A N/A 29.93%
Class I 7.75% N/A N/A 78.22%
- ---------------------------
[*] The inception date for the Fund (Class A shares) was April 21, 1986. The
inception date for Class B and Class I shares was October 23, 1993. The
inception date for Class C shares was April 30, 1996.
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. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding the 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 the Fund's shares and the risks associated with the 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 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, 1998, Statement
of Assets and Liabilities as of December 31, 1998, Statement of Operations for
the fiscal year ended December 31, 1998, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1998, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in the Fund's December 31, 1998 Annual Report to shareholders, are incorporated
by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("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.
<PAGE>
PART C. OTHER INFORMATION
Item 23: Exhibits:
(a) Articles of Incorporation:
(1) Amended and Restated Declaration of Trust dated
December 10, 1992, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(2) Redesignation of Shares of Beneficial Interest and
Establishment and Designation of Additional Series
and Classes of Shares of Beneficial Interest (No Par
Value) filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(3) Amendment to Amended and Restated Declaration of
Trust, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(4) Amendment to Amended and Restated Declaration of
Trust, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(5) Establishment and Designation of Additional Series
(Ivy Emerging Growth Fund), filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(6) 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. 102 and
incorporated by reference herein.
(7) 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. 102 and incorporated by
reference herein.
(8) Establishment and Designation of Additional Series
(Ivy China Region Fund), filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(9) 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. 102 and incorporated by reference herein.
(10) Establishment and Designation of Additional Class
(Ivy International Fund--Class I), filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(11) 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. 102 and
incorporated by reference herein.
(12) Establishment and Designation of Series and Classes
(Ivy International Bond Fund--Class A and Class B),
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(13) 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. 102 and
incorporated by reference herein.
(14) Redesignation of Ivy Short-Term U.S. Government
Securities Fund as Ivy Short-Term Bond Fund, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(15) Redesignation of Shares (Ivy Money Market Fund--Class
A and Ivy Money Market Fund--Class B), filed with
Post-Effective Amendment No. 84 and incorporated by
reference herein.
(16) 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 and incorporated
by reference herein.
(17) 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 and incorporated by reference
herein.
(18) 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 and incorporated
by reference herein.
(19) 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 and
incorporated by reference herein.
(20) 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 and incorporated by reference herein.
(21) 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 and incorporated
by reference herein.
(22) 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.
(23) 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 Post-Effective Amendment No.
98 to Registration Statement 2-17613 and incorporated
by reference herein.
(24) Establishment and designation of Series and Classes
(Ivy US Blue Chip Fund--Class A, Class B, Class C,
Class I and Advisor Class), filed with Post-Effective
Amendment No. 101 to Registration Statement 2-17613
and incorporated by reference herein.
(25) Redesignation of Series and Classes (Ivy High Yield
Fund redesignated as Ivy International Strategic Bond
Fund) filed with this Post-Effective Amendment No.
110..
(26) Establishment and designation of Series and Classes
(Ivy European Opportunities Fund -- Class A, Class B,
Class C, Class I and Advisor Class) filed with this
Post-Effective Amendment No. 110.
(b) By-laws:
(1) By-Laws, as amended, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(c) Instruments Defining the Rights of Security Holders:
(1) 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 and incorporated by reference herein.
(2) Specimen Security for Ivy Emerging Growth Fund, filed
with Post-Effective Amendment No. 70 and incorporated
by reference herein.
(3) Specimen Security for Ivy China Region Fund, filed
with Post-Effective Amendment No. 74 and incorporated
by reference herein.
(4) Specimen Security for Ivy Latin American Strategy
Fund, filed with Post-Effective Amendment No. 75 and
incorporated by reference herein.
(5) Specimen Security for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 and incorporated
by reference herein.
(6) Specimen Security for Ivy International Bond Fund,
filed with Post-Effective Amendment No. 76 and
incorporated by reference herein.
(7) 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 and incorporated by reference
herein.
(d) Investment Advisory Contracts:
(1) 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.
102 and incorporated by reference herein.
(2) Subadvisory Contract by and among Ivy Fund, Ivy
Management, Inc. and Boston Overseas Investors, Inc.,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(3) Assignment Agreement relating to Subadvisory
Contract, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(4) Business Management and Investment Advisory Agreement
Supplement for Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(5) Business Management and Investment Advisory Agreement
Supplement for Ivy China Region Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(6) Business Management and Investment Advisory
Supplement for Ivy Latin America Strategy Fund, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(7) Business Management and Investment Advisory Agreement
Supplement for Ivy New Century Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(8) Business Management and Investment Advisory Agreement
Supplement for Ivy International Bond Fund, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(9) 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. 102 and
incorporated by reference herein.
(10) Master Business Management Agreement between Ivy Fund
and Ivy Management, Inc., filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(11) Supplement to Master Business Agreement between Ivy
Fund and Ivy Management, Inc. (Ivy Canada Fund),
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(12) Investment Advisory Agreement between Ivy Fund and
Mackenzie Financial Corporation, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(13) 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 and
incorporated by reference herein.
(14) 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 and incorporated by
reference herein.
(15) 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 and incorporated by
reference herein.
(16) 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 and incorporated by
reference herein.
(17) 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 and incorporated
by reference herein.
(18) 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 and
incorporated by reference herein.
(19) 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 and
incorporated by reference herein.
(20) 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 and incorporated
by reference herein.
(21) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy US Blue Chip Fund), filed
with Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(22) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy
Fund and Ivy Management, Inc. (Ivy International
Strategic Bond Fund) filed with this Post-Effective
Amendment No. 110.
(23) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy European Opportunities
Fund) filed with this Post-Effective Amendment
No. 110.
(24) Subadvisory Agreement between Ivy Management, Inc.
and Henderson Investment Management Limited (Ivy
International Small Companies Fund) filed with this
Post-Effective Amendment No. 110.
(25) Amendment to Subadvisory Agreement between Ivy
Management, Inc. and Henderson Investment Management
Limited (Ivy European Opportunities Fund) filed with
this Post-Effective Amendment No. 110.
(e) Underwriting Contracts:
(1) Dealer Agreement, as amended, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(2) Amended and Restated Distribution Agreement, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(3) Addendum to Amended and Restated Distribution
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(4) Addendum to Amended and Restated Distribution
Agreement (Ivy Money Market Fund--Class A and Class
B), filed with Post-Effective Amendment No. 84 and
incorporated by reference herein.
(5) Form of Addendum to Amended and Restated Distribution
Agreement (Class C), filed with Post-Effective
Amendment No. 84 and incorporated by reference
herein.
(6) 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 and incorporated
by reference herein.
(7) 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 and
incorporated by reference herein.
(8) 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
and incorporated by reference herein.
(9) 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 and incorporated by reference
herein.
(10) Form of Addendum to Amended and Restated Distribution
Agreement (Advisor Class), filed with Post-Effective
Amendment No. 96 and incorporated by reference
herein.
(11) 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 and incorporated
by reference herein.
(12) Addendum to Amended and Restated Distribution
Agreement (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated by
reference herein.
(13) Addendum to Amended and Restated Distribution
Agreement (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(14) Addendum to Amended and Restated Distribution
Agreement (Ivy International Strategic Bond Fund)
filed with this Post-Effective Amendment No. 110.
(15) Addendum to Amended and Restated Distribution
Agreement (Ivy European Opportunities Fund) filed
with this Post-Effective Amendment No. 110.
(16) Amended and Restated Distribution Agreement, filed
with this Post-Effective Amendment No. 110.
(f) Bonus or Profit Sharing Contracts: Inapplicable.
(g) Custodian Agreements:
(1) Custodian Agreement between Ivy Fund and Brown
Brothers Harriman & Co., filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(2) Foreign Custody Manager Delegation Agreement between
Ivy Fund and Brown Brothers Harriman & Co., filed
with this Post-Effective Amendment No. 110.
(h) Other Material Contracts:
(1) 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.
102 and incorporated by reference herein.
(2) Addendum to Administrative Services Agreement
Supplement for Ivy International Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(3) Administrative Services Agreement Supplement for Ivy
Emerging Growth Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(4) Administrative Services Agreement Supplement for Ivy
Money Market Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(5) Administrative Services Agreement Supplement for Ivy
China Region Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(6) Administrative Services Agreement Supplement for
Class I Shares of Ivy International Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(7) 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. 102 and incorporated by
reference herein.
(8) Fund Accounting Services Agreement Supplement for Ivy
Growth with Income Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(9) Fund Accounting Services Agreement Supplement for Ivy
China Region Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(10) Transfer Agency and Shareholder Services Agreement
between Ivy Fund and Ivy Management, Inc., filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(11) Addendum to Transfer Agency and Shareholder Services
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(12) Assignment Agreement relating to Transfer Agency and
Shareholder Services Agreement, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(13) Administrative Services Agreement Supplement for Ivy
Latin America Strategy Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(14) Administrative Services Agreement Supplement for Ivy
New Century Fund, filed with Post-Effective Amendment
No. 102 and incorporated by reference herein.
(15) Fund Accounting Services Agreement Supplement for Ivy
Latin America Strategy Fund, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(16) Fund Accounting Services Agreement Supplement for Ivy
New Century Fund, filed with Post-Effective Amendment
No. 102 and incorporated by reference herein.
(17) Addendum to Transfer Agency and Shareholder Services
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(18) Administrative Services Agreement Supplement for Ivy
International Bond Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(19) Fund Accounting Services Agreement Supplement for
International Bond Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(20) Addendum to Transfer Agency and Shareholder Services
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(21) Addendum to Transfer Agency and Shareholder Services
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(22) 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. 102 and incorporated by reference
herein.
(23) 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. 102 and incorporated by reference
herein.
(24) 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 and incorporated by
reference herein.
(25) Form of Addendum to Transfer Agency and Shareholder
Services Agreement (Class C), filed with
Post-Effective Amendment No. 84 and incorporated by
reference herein.
(26) Form of Administrative Services Agreement Supplement
for Ivy Global Science & Technology Fund, filed with
Post-Effective Amendment No. 86 and incorporated by
reference herein.
(27) Form of Fund Accounting Services Agreement Supplement
for Ivy Global Science & Technology Fund, filed with
Post-Effective Amendment No. 86 and incorporated by
reference herein.
(28) Form of Addendum to Transfer Agency and Shareholder
Services Agreement for Ivy Global Science &
Technology Fund, filed with Post-Effective Amendment
No. 86 and incorporated by reference herein.
(29) 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 and
incorporated by reference herein.
(30) 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 and
incorporated by reference herein.
(31) 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 and incorporated by reference
herein.
(32) Form of Administrative Services Agreement Supplement
for Ivy Pan-Europe Fund, filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(33) Form of Fund Accounting Services Agreement Supplement
for Ivy Pan-Europe Fund, filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(34) Form of Addendum to Transfer Agency and Shareholder
Services Agreement for Ivy Pan-Europe Fund, filed
with Post-Effective Amendment No. 94 and incorporated
by reference herein.
(35) Form of Administrative Services Agreement Supplement
for Ivy International Fund II, filed with
Post-Effective Amendment No. 94 and incorporated by
reference herein.
(36) Form of Fund Accounting Services Agreement Supplement
for Ivy International Fund II, filed with
Post-Effective Amendment No. 94 and incorporated by
reference herein.
(37) Form of Addendum to Transfer Agency and Shareholder
Services Agreement for Ivy International Fund II,
filed with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(38) 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 and incorporated by
reference herein.
(39) Form of Addendum to Transfer Agency and Shareholder
Services Agreement (Advisor Class), filed with
Post-Effective Amendment No. 96 and incorporated by
reference herein.
(40) 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 and incorporated by reference
herein.
(41) 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 and incorporated by reference
herein.
(42) 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 and incorporated by reference herein.
(43) Addendum to Fund Accounting Services Agreement (Ivy
High Yield Fund), filed with Post-Effective Amendment
No. 98 and incorporated by reference herein.
(44) Addendum to Administrative Services Agreement (Ivy
High Yield Fund), filed with Post-Effective Amendment
No. 98 and incorporated by reference herein.
(45) 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 and incorporated by reference herein (a
corrected version of which was filed with
Post-Effective Amendment No. 99).
(46) Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(47) Addendum to Fund Accounting Services Agreement (Ivy
US Blue Chip Fund), to be filed with Post-Effective
Amendment No. 101 to Registration Statement 2-17613
and incorporated by reference herein.
(48) Addendum to Administrative Services Agreement (Ivy US
Blue Chip Fund), filed with Post-Effective Amendment
No. 101 to Registration Statement 2-17613 and
incorporated by reference herein.
(49) Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy International Strategic Bond Fund)
filed with this Post-Effective Amendment No. 110..
(50) Addendum to Fund Accounting Services Agreement (Ivy
International Strategic Bond Fund) filed with this
Post-Effective Amendment No. 110..
(51) Addendum to Administrative Services Agreement (Ivy
International Strategic Bond Fund) filed with this
Post-Effective Amendment No. 110..
(52) Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy European Opportunities Fund) filed
with this Post-Effective Amendment No. 110.
(53) Addendum to Fund Accounting Services Agreement (Ivy
European Opportunities Fund) filed with this
Post-Effective Amendment No. 110.
(54) Addendum to Administrative Services Agreement (Ivy
European Opportunities Fund) filed with this
Post-Effective Amendment No. 110.
(i) Legal Opinion: Opinion of Dechert Price & Rhoads filed with
this Post-Effective Amendment No. 110.
(j) Other Opinions: Opinions of PricewaterhouseCoopers filed with
this Post-Effective Amendment No. 110.
(k) Omitted Financial Statements: Report of Accountants filed with
this Post-Effective Amendment No. 110.
(l) Initial Capital Agreements: Not applicable.
(m) Rule 12b-1 Plan:
(1) 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. 102 and incorporated by reference
herein.
(2) 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. 102 and
incorporated by reference herein.
(3) Distribution Plan for Class C Shares of Ivy Growth
with Income Fund, filed with Post-Effective Amendment
No. 102 and incorporated by reference herein.
(4) Form of Rule 12b-1 Related Agreement, filed with
Post-Effective Amendment No. 102 and incorporated by
reference herein.
(5) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(6) Supplement to Distribution Plan for Ivy Fund Class B
Shares, filed with Post-Effective Amendment No. 103
and incorporated by reference herein.
(7) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares, filed
with Post-Effective Amendment No. 103 and
incorporated by reference herein.
(8) Supplement to Distribution Plan for Ivy Fund Class B
Shares, filed with Post-Effective Amendment No. 103
and incorporated by reference herein.
(9) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares, filed
with Post-Effective Amendment No. 103 and
incorporated by reference herein.
(10) Supplement to Distribution Plan for Ivy Fund Class B
Shares, filed with Post-Effective Amendment No. 103
and incorporated by reference herein.
(11) 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 and incorporated by reference
herein.
(12) 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 and incorporated by
reference herein.
(13) 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 and incorporated by
reference herein.
(14) Form of Supplement to Distribution Plan for Ivy Fund
Class B Shares (Ivy Global Science & Technology
Fund), filed with Post-Effective Amendment No. 87 and
incorporated by reference herein.
(15) Form of Supplement to Distribution Plan for Ivy Fund
Class C Shares (Ivy Global Science & Technology
Fund), filed with Post-Effective Amendment No. 87 and
incorporated by reference herein.
(16) 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 and incorporated
by reference herein.
(17) 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 and incorporated by reference herein.
(18) 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 and incorporated by reference herein.
(19) 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 and incorporated by reference herein.
(20) Form of Supplement to Distribution Plan for Ivy Fund
Class B Shares (Ivy Pan-Europe Fund), filed with
Post-Effective Amendment No. 94 and incorporated by
reference herein.
(21) Form of Supplement to Distribution Plan for Ivy Fund
Class C Shares (Ivy Pan-Europe Fund), filed with
Post-Effective Amendment No. 94 and incorporated by
reference herein.
(22) 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 and incorporated by reference
herein.
(23) Form of Supplement to Distribution Plan for Ivy Fund
Class B Shares (Ivy International Fund II), filed
with Post-Effective Amendment No. 94 and incorporated
by reference herein.
(24) Form of Supplement to Distribution Plan for Ivy Fund
Class C Shares (Ivy International Fund II), filed
with Post-Effective Amendment No. 94 and incorporated
by reference herein.
(25) 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 and incorporated by reference herein.
(26) 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 and incorporated
by reference herein.
(27) 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 and incorporated
by reference herein.
(28) 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 and incorporated by reference herein.
(29) Supplement to Distribution Plan for Ivy Fund Class B
Shares (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated by
reference herein.
(30) Supplement to Distribution Plan for Ivy Fund Class C
Shares (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated by
reference herein.
(31) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy US
Blue Chip Fund), filed with Post-Effective Amendment
No. 101 and incorporated by reference herein.
(32) Supplement to Distribution Plan for Ivy Fund Class B
Shares (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 and incorporated by
reference herein.
(33) Supplement to Distribution Plan for Ivy Fund Class C
Shares (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 and incorporated by
reference herein.
(34) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
International Strategic Bond Fund) filed with this
Post-Effective Amendment No. 110.
(35) Supplement to Distribution Plan for Ivy Fund Class B
Shares (Ivy International Strategic Bond Fund) filed
with this Post-Effective Amendment No. 110.
(36) Supplement to Distribution Plan for Ivy Fund Class C
Shares (Ivy International Strategic Bond Fund) filed
with this Post-Effective Amendment No. 110.
(37) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
European Opportunities Fund) filed with this
Post-Effective Amendment No.
110.
(38) Supplement to Distribution Plan for Ivy Fund Class B
Shares (Ivy European Opportunities Fund) filed with
this Post-Effective Amendment No. 110.
(39) Supplement to Distribution Plan for Ivy Fund Class C
Shares (Ivy European Opportunities Fund) filed with
this Post-Effective Amendment No. 110.
(40) Form of Distribution Plan For Ivy Fund Class B
Shares, filed with Post-Effective Amendment No. 107
and incorporated by reference herein.
.
(n) Financial Data Schedules: Filed with this Post-Effective
Amendment No. 110.
(o) Rule 18f-3 Plans:
(1) Plan adopted pursuant to Rule 18f-3 under the
Investment Company Act of 1940, filed with
Post-Effective Amendment No. 83 and incorporated by
reference herein.
(2) 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 and
incorporated by reference herein.
(3) 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 and
incorporated by reference herein.
(4) 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 and
incorporated by reference herein.
(5) 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 and
incorporated by reference herein.
(6) 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 and
incorporated by reference herein.
(7) 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 and
incorporated by reference herein.
(8) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940, filed
with Post-Effective Amendment No. 98 and incorporated
by reference herein (a corrected version of which was
filed with Post-Effective Amendment No. 99).
(9) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940, filed
with Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(10) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940 filed
with this Post-Effective Amendment No. 110.
Item 24. Persons Controlled by or Under Common Control with the Fund: Not
applicable
Item 25. 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 and incorporated by
reference herein.
Item 26. 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 eighteen series of the Trust,
Mackenzie Financial Corporation, the adviser to Ivy Canada
Fund and Ivy Global Natural Resources Fund, Northern Cross
Investments Limited (the successor to Boston Overseas
Investors, Inc.), and Henderson Investment Management Limited,
the subadviser to Ivy International Small Companies Fund and
Ivy European Opportunities Fund.
The list required by this Item 26 of officers and directors of
Ivy Management, Inc., Mackenzie Financial Corporation,
Northern Cross Investments Limited and Henderson Investment
Management 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.
Item 27. Principal Underwriters
(a) Ivy Mackenzie Distributors, 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. IMDI also serves as the distributor for Mackenzie
Solutions.
(b) The information required by this Item 27 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
Item 28. 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.
Item 29. Management Services: Not applicable.
Item 30. Undertakings: Not applicable.
<PAGE>
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. 110 to
its Registration Statement pursuant to Rule 485(b)(1) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment No. 110 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 3rd day of May, 1999.
IVY FUND
By: Keith J. Carlson**
President
By: /S/ JOSEPH R. FLEMING
Joseph R. Fleming, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 110 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 5/3/99
(Chief Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee 5/3/99
PAUL H. BROYHILL* Trustee 5/3/99
STANLEY CHANNICK* Trustee 5/3/99
FRANK W. DEFRIECE, JR.* Trustee 5/3/99
ROY J. GLAUBER* Trustee 5/3/99
KEITH J. CARLSON** Trustee and President 5/3/99
JOSEPH G. ROSENTHAL* Trustee 5/3/99
RICHARD N. SILVERMAN* Trustee 5/3/99
J. BRENDAN SWAN* Trustee 5/3/99
C. WILLIAM FERRIS* Treasurer (Chief 5/3/99
Financial Officer)
By: /S/ JOSEPH R. FLEMING
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.
<PAGE>
EXHIBIT INDEX
Exhibit (a)(25): Redesignation of Series and Classes (Ivy High Yield
Fund redesignated as Ivy International Strategic Bond Fund).
Exhibit (a)(26): Establishment and designation of Series and Classes (Ivy
European Opportunities Fund -- Class A, Class B, Class C,
Class I and Advisor Class).
Exhibit (d)(22): Supplement to Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy Management, Inc.
Ivy International Strategic Bond Fund).
Exhibit (d)(23): Supplement to Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy Management, Inc.
(Ivy European Opportunities Fund).
Exhibit (d)(24): Subadvisory Agreement between Ivy Management, Inc. and
Henderson Investment Management Limited (Ivy International
Small Companies Fund).
Exhibit (d)(25): Amendment to Subadvisory Agreement between Ivy Management,
Inc. and Henderson Investment Management Limited (Ivy
European Opportunities Fund).
Exhibit (e)(14): Addendum to Amended and Restated Distribution Agreement (Ivy
International Strategic Bond Fund).
Exhibit (e)(15): Addendum to Amended and Restated Distribution Agreement (Ivy
European Opportunities Fund).
Exhibit (e)(16): Amended and Restated Distribution Agreement.
Exhibit (g)(2): Foreign Custody Manager Delegation Agreement.
Exhibit (h)(49): Addendum to Transfer Agency and Shareholder Services Agreement
(Ivy International Strategic Bond Fund).
Exhibit (h)(50): Addendum to Fund Accounting Services Agreement (Ivy
International Strategic Bond Fund).
Exhibit (h)(51): Addendum to Administrative Services Agreement (Ivy
International Strategic Bond Fund).
Exhibit (h)(52): Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy European Opportunities Fund).
Exhibit (h)(53): Addendum to Fund Accounting Services Agreement (Ivy European
Opportunities Fund).
Exhibit (h)(54): Addendum to Administrative Services Agreement (Ivy European
Opportunities Fund).
Exhibit (m)(34): Supplement to Master Amended and Restated Distribution Plan
for Ivy Fund Class A Shares (Ivy International Strategic Bond
Fund.
Exhibit (m)(35): Supplement to Distribution Plan for Ivy Fund Class B Shares
(Ivy International Strategic Bond Fund).
Exhibit (m)(36): Supplement to Distribution Plan for Ivy Fund Class C Shares
(Ivy International Strategic Bond Fund).
Exhibit (m)(37): Supplement to Master Amended and Restated Distribution Plan
for Ivy Fund Class A Shares (Ivy European Opportunities Fund).
Exhibit (m)(38): Supplement to Distribution Plan for Ivy Fund Class B Shares
(Ivy European Opportunities Fund).
Exhibit (m)(39): Supplement to Distribution Plan for Ivy Fund Class C Shares
(Ivy European Opportunities Fund).
Exhibit (i): Opinion of Dechert Price & Rhoads.
Exhibit (j): Opinion of PricewaterhouseCoopers.
Exhibit (k): Reports of PricewaterhouseCoopers.
Exhibit (n): Financial Data Schedules.
Exhibit (o)(10): Amended and Restated Plan adopted pursuant to Rule 18f-3
under the Investment Company Act of 1940, to be filed by
amendment.
IVY FUND
Ivy High Yield Fund
Redesignation of Series of Shares of Beneficial Interest, and
Redesignation of Classes of Shares of Beneficial Interest,
No Par Value Per Share
I, Michael G. Landry, being a duly elected, qualified and acting
Trustee of Ivy Fund (the "Trust"), a business trust formed under the laws of the
Commonwealth of Massachusetts, DO HEREBY CERTIFY that, by written consent, the
Trustees of the Trust (the "Trustees"), pursuant to Article III of the Agreement
and Declaration of Trust of the Trust dated December 21, 1983, as amended and
restated December 10, 1992 (the "Declaration of Trust"), duly approved, adopted
and consented to the following resolutions as actions of the Trustees of the
Trust:
WHEREAS, acting pursuant to Article III of the Trust's Declaration of
Trust, the Trustees established Ivy International Bond Fund as an additional
series of the Trust pursuant to an Establishment and Designation of Additional
Series dated September 21, 1994, which series was redesignated as Ivy High Yield
Fund (the "Fund") on January 30, 1998, and which Fund currently has an unlimited
number of authorized and unissued shares of beneficial interest designated as
"Ivy High Yield Fund - Class A" ("Class A"), "Ivy High Yield Fund - Class B"
("Class B"), "Ivy High Yield Fund - Class C" ("Class C"), "Ivy High Yield Fund -
Class I" ("Class I") and "Ivy High Yield Fund - Advisor Class" ("Advisor Class")
shares (each a "Class" and, collectively, the "Classes"); and
WHEREAS, the Trustees, acting pursuant to Article III of the
Declaration of Trust, now desire to redesignate the Ivy High Yield Fund series
of the Trust as Ivy International Strategic Bond Fund and to change the name of
each Class;
NOW, THEREFORE, IT IS HEREBY:
RESOLVED, that "Ivy High Yield Fund" be, and it hereby is, redesignated
as "Ivy International Strategic Bond Fund";
FURTHER RESOLVED, that the name of each of the Fund's Class A, Class B,
Class C, Class I and Advisor Class shares be, and it hereby is,
redesignated as "Ivy International Strategic Bond Fund - Class A," "Ivy
International Strategic Bond Fund - Class B," "Ivy International
Strategic Bond Fund - Class C," "Ivy International Strategic Bond Fund
- Class I," and "Ivy International Strategic Bond Fund - Advisor
Class," respectively;
FURTHER RESOLVED, that the preceding resolutions shall constitute an
amendment to the Declaration of Trust (the "Amendment"), effective as
of the filing date of the Registration Statement pertaining to Ivy
International Strategic Bond Fund, to be filed with the Securities and
Exchange Commission (the "SEC") pursuant to Rule 485(a) under the
Securities Act of 1933; and
FURTHER RESOLVED, that the officers of the Trust be, and they hereby
are, authorized to file such Amendment to the Declaration of Trust in
the offices of the Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, I have signed this Amendment this 23rd day of
December, 1998.
/s/ MICHAEL G. LANDRY
Michael G. Landry, as Trustee
The above signature is the true and correct signature of Michael G. Landry,
Trustee of the Trust.
/s/ C. WILLIAM FERRIS
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
IVY FUND
Ivy European Opportunities Fund
Establishment and Designation of Additional
Series of Shares of Beneficial Interest,
No Par Value Per Share
I, Michael G. Landry, being a duly elected, qualified and acting
Trustee of Ivy Fund (the "Trust"), a business trust formed under the laws of the
Commonwealth of Massachusetts, DO HEREBY CERTIFY that, at a meeting held on
February 5, 1999, the Trustees of the Trust (the "Trustees"), pursuant to
Article III of the Agreement and Declaration of Trust of the Trust dated
December 21, 1983, as amended and restated December 10, 1992 (the "Declaration
of Trust"), duly approved, adopted and consented to the following resolutions as
actions of the Trustees of the Trust:
RESOLVED, that (i) the shares of beneficial interest of Ivy Fund,
having previously been divided into nineteen separate series,
designated as 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 International Strategic Bond Fund, Ivy Money Market Fund, Ivy
Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy
US Emerging Growth Fund, shall hereby be divided into one additional
series designated as "Ivy European Opportunities Fund" (the "Fund" and,
collectively with the other nineteen series of Ivy Fund, the "Series");
and (ii) having established and designated the Fund as an additional
Series of Ivy Fund, there shall hereby be designated an unlimited
number of authorized and unissued shares of beneficial interest of Ivy
Fund as (a) "Ivy European Opportunities Fund--Class A," (b) "Ivy
European Opportunities Fund--Class B," (c) "Ivy European Opportunities
Fund--Class C," (d) "Ivy European Opportunities Fund--Class I" and (e)
"Ivy European Opportunities Fund--Advisor Class," with the Fund and
each of its classes of shares being subject to all provisions of the
Declaration of Trust relating to shares of Ivy Fund generally, and
having the following special and relative rights:
A. The Fund shall be authorized to hold cash and invest in securities and
instruments and use investment techniques as described in Ivy Fund's
registration statement under the Securities Act of 1933, as amended
from time to time. Each share of beneficial interest, no par value per
share, of the Fund shall be redeemable as provided in the Declaration
of Trust, shall be entitled to one vote (or fraction thereof in
respect of a fractional share) on matters on which shares of the Fund
shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to the Fund. The proceeds of sales of
shares of the Fund, together with any income and gain thereon, less
any diminution or expenses thereof, shall irrevocably belong to the
Fund, unless otherwise required by law. Each share of the Fund shall
be entitled to receive its pro rata share of net assets of the Fund
upon the Fund's liquidation. Upon redemption of a shareholder's
shares, or indemnification for liabilities incurred by reason of a
shareholder being or having been a shareholder of the Fund, such
shareholder shall be paid solely out of the property of the Fund.
B. Shareholders of the Fund shall vote separately as a Series on any
matter to the extent required by applicable federal or state law.
Shareholders of each class of the Fund shall have (i) exclusive voting
rights with respect to matters on which the holders of each such class
shall be entitled to exclusive voting rights under applicable federal
or state law, and (ii) no voting rights with respect to matters on
which the holders of another class of shares of the Fund or the
holders of another Series (or class thereof) shall be entitled to
exclusive voting rights under applicable federal or state law.
C. The assets and liabilities of Ivy Fund existing as of the end of the
day immediately preceding the date on which the Registration Statement
for the Fund becomes effective shall be allocated among the Series
other than the Fund in accordance with Article III of the Declaration
of Trust, and thereafter the assets and liabilities of Ivy Fund shall
be allocated among all Series and classes thereof in accordance with
Article III of the Declaration of Trust, except as provided below:
(1) Costs incurred by Ivy Fund on behalf of the Fund in
connection with the organization, registration and
public offering of shares of the Fund shall be
allocated to the Fund and shall be amortized by the
Fund in accordance with applicable law and generally
accepted accounting principles.
(2) Ivy Fund may from time to time in particular cases
make specific allocations of assets or liabilities
among the Series.
D. Ivy Fund (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to
change the designation of any Series (or class thereof) now or
hereafter created, or to otherwise change the special and relative
rights of any such Series (or class), provided that such change shall
not adversely affect the rights of shareholders of that Series (or
class).
E. The dividends and distributions with respect to each class of shares
shall be in such amount as may be declared from time to time by Ivy
Fund's Board of Trustees in accordance with the Declaration of Trust
and applicable law.
F. (1) Each Class B share of the Fund, other than a share purchased
through the automatic reinvestment of a dividend or a
distribution with respect to Class B shares, shall be converted
automatically, and without any action or choice on the part of
the holder thereof, into and be reclassified as a Class A share
of the Fund on the date that is the first business day following
the last calendar day of the month in which the eighth
anniversary date of the date of the issuance of such Class B
share falls (the "Conversion Date") on the basis of the relative
net asset values of the two classes, without the imposition of
any sales load, fee or other charge;
(2) Each Class B share purchased through the automatic reinvestment
of a dividend or a distribution with respect to Class B shares
shall be segregated in a separate sub-account. Each time any
Class B shares of the Fund in a shareholder's Fund account (other
than those in the sub-account) convert to Class A shares of the
Fund, a pro rata portion of the Class B shares then 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 distributions;
(3) The conversion of Class B shares into Class A shares may be
suspended if (i) a ruling of the Internal Revenue Service to the
effect that the conversion of Class B shares does not constitute
a taxable event under Federal income tax law is revoked or (ii)
an opinion of counsel on such tax matter is withdrawn or (iii)
the Board of Trustees determines that continuing such conversions
would have material, adverse tax consequences for the Fund or its
shareholders; and
(4) On the Conversion Date, the Class B shares converted into Class A
shares shall cease to accrue dividends and shall no longer be
deemed outstanding and the rights of the holders thereof (except
the right to receive the number of Class A shares into which the
Class B shares have been converted and any declared but unpaid
dividends to the Conversion Date) shall cease. Certificates
representing Class A shares of the Fund resulting from the
conversion of Class B shares need not be issued until
certificates representing the Class B shares converted, if
issued, have been received by Ivy Fund or its agent duly endorsed
for transfer.
FURTHER RESOLVED, that the preceding resolutions shall constitute an
Amendment to the Declaration of Trust, effective as of the date that
the Registration Statement for the Fund described in the following
resolution is filed with the Securities and Exchange Commission
("SEC"), and that the officers of Ivy Fund be, and they hereby are,
authorized to file such Amendment to the Declaration of Trust in the
offices of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, I have signed this Amendment this 8th day of March
1999.
MICHAEL G. LANDRY
Michael G. Landry, as Trustee
The above signature is the true and correct signature of Michael G. Landry,
Trustee of the Trust.
C. WILLIAM FERRIS
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
EXHIBIT d(22)
IVY FUND
MASTER BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
Ivy International Strategic Bond Fund
AGREEMENT made as of the 30th day of April, 1999, by and between Ivy
Fund (the "Trust") and Ivy Management, Inc. (the "Manager").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Business Management and
Investment Advisory Agreement dated December 31, 1991 (the "Master Agreement"),
pursuant to which the Trust has appointed the Manager to provide the business
management and investment advisory services specified in that Master Agreement;
and
WHEREAS, Ivy International Strategic Bond Fund (the "Fund") is a
separate investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts the
Master Agreement with respect to the Fund, and the Manager hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, the Fund shall pay the Manager a monthly fee on
the first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in the Prospectus of the
Fund for determining net asset value per share) of the net assets of the Fund
during the preceding month at the annual rate of 0.75%.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund as of the date specified above,
and unless sooner terminated as hereinafter provided, the Agreement shall remain
in effect with respect to the Fund for a period of more than two (2) years from
such date only so long as the continuance is specifically approved at least
annually (a) by the vote of a majority of the outstanding voting securities of
the Fund (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) or by the Trust's entire Board of Trustees and (b) by the vote,
cast in person at a meeting called for that purpose, of a majority of the
Trust's Independent Trustees. This Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty, by vote of a majority of
the outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Trust's entire Board of Trustees on sixty (60) days'
written notice to the Manager or by the Manager on sixty (60) days' written
notice to the Trust. This Agreement shall terminate automatically in the event
of its assignment (as defined in the 1940 Act).
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MANAGEMENT, INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
EXHIBIT d(23)
IVY FUND
MASTER BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
Ivy European Opportunities Fund
AGREEMENT made as of the 30th day of April, 1999, by and between Ivy
Fund (the "Trust") and Ivy Management, Inc. (the "Manager").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Business Management and
Investment Advisory Agreement dated December 31, 1991 (the "Master Agreement"),
pursuant to which the Trust has appointed the Manager to provide the business
management and investment advisory services specified in that Master Agreement;
and
WHEREAS, Ivy European Opportunities Fund (the "Fund") is a separate
investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts the
Master Agreement with respect to the Fund, and the Manager hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, the Fund shall pay the Manager a monthly fee on
the first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in the Prospectus of the
Fund for determining net asset value per share) of the net assets of the Fund
during the preceding month at the annual rate of 1.00%.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund as of the date specified above,
and unless sooner terminated as hereinafter provided, the Agreement shall remain
in effect with respect to the Fund for a period of more than two (2) years from
such date only so long as the continuance is specifically approved at least
annually (a) by the vote of a majority of the outstanding voting securities of
the Fund (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) or by the Trust's entire Board of Trustees and (b) by the vote,
cast in person at a meeting called for that purpose, of a majority of the
Trust's Independent Trustees. This Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty, by vote of a majority of
the outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Trust's entire Board of Trustees on sixty (60) days'
written notice to the Manager or by the Manager on sixty (60) days' written
notice to the Trust. This Agreement shall terminate automatically in the event
of its assignment (as defined in the 1940 Act).
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MANAGEMENT, INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of February, 1999, between IVY
MANAGEMENT, INC., 700 South Federal Highway, Boca Raton, Florida 33432 U.S.A., a
Massachusetts corporation (hereinafter called the "Manager"), and HENDERSON
INVESTMENT MANAGEMENT LIMITED, 3 Finsbury Avenue, London, England EC2M 2PA, an
United Kingdom corporation (hereinafter called the "Subadviser").
WHEREAS, Ivy Fund (the "Trust") is a Massachusetts business trust
organized with one or more series of shares, and is registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Manager has entered into a Master Business Management and
Investment Advisory Agreement dated December 31, 1991, as amended (the "Advisory
Agreement"), with the Trust, pursuant to which the Manager acts as investment
adviser to a specified portion of the portfolio assets of certain series of the
Trust listed on Schedule A hereto, as amended from time to time (each a "Fund"
and, collectively, the "Funds"); and
WHEREAS, the Manager desires to utilize the services of the Subadviser
as investment subadviser with respect to certain portfolio assets of each Fund;
and
WHEREAS, the Subadviser is willing to perform such services on the
terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Duties of the Subadviser. The Subadviser will serve the Manager as
investment subadviser with respect to certain portfolio assets of each
Fund, as set forth on the attached Schedule A.
(a) As investment subadviser to the Funds, the Subadviser is hereby
authorized and directed and hereby agrees, in accordance with the
Subadviser's best judgment and subject to the stated investment
objectives, policies and restrictions of the Funds as set forth in the
current prospectuses and statements of additional information of the
Trust (including amendments) and in accordance with the Trust's
Declaration of Trust, as amended, and By-laws governing the offering
of its shares (collectively, the "Trust Documents"), the 1940 Act and
the provisions of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), relating to regulated investment companies,
and subject to such resolutions as from time to time may be adopted by
the Trust's Board of Trustees, and provided that the Trust Documents
are all furnished to the Subadviser, to develop, recommend and
implement such investment program and strategy for the Funds as may
from time to time be most appropriate to the achievement of the
investment objectives of the Funds as stated in the aforesaid
prospectuses, to provide research and analysis relative to the
investment program and investments of the Funds, to determine what
securities should be purchased and sold and to monitor on a continuing
basis the performance of the portfolio securities of the Funds.
(b) The Subadviser shall (i) comply with all reasonable requests of the
Trust for information, including information required in connection
with the Trust's filings with the Securities and Exchange Commission
(the "SEC") and state securities commissions, and (ii) provide such
other services as the Subadviser shall from time to time determine to
be necessary or useful to the administration of the Funds.
(c) The Subadviser shall furnish to the Trust's Board of Trustees periodic
reports on the investment performance of each Fund and on the
performance of its obligations under this Agreement and shall supply
such additional reports and information as the Trust's officers or
Board of Trustees shall reasonably request.
(d) On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other
customers, the Subadviser, to the extent permitted by applicable law,
may aggregate the securities to be so sold or purchased in order to
obtain the best execution or lower brokerage commissions, if any. The
Subadviser also may purchase or sell a particular security for one or
more customers in different amounts. On either occasion, and to the
extent permitted by applicable law and regulations, allocation of the
securities so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Subadviser in the manner it
considers to be the most equitable and consistent with its fiduciary
obligations to the Fund involved and to such other customers. In no
instance, however, will a Fund's assets be purchased from or sold to
the Manager, the Subadviser, the Trust's principal underwriter, or any
affiliated person of either the Trust, the Manager, the Subadviser or
the principal underwriter, acting as principal in the transaction,
except to the extent permitted by the SEC and the 1940 Act.
(e) The Subadviser shall provide the Funds' custodian on each business day
with information relating to all transactions concerning each Fund's
assets and shall provide the Manager with such information upon
request of the Manager.
(f) The investment advisory services provided by the Subadviser under this
Agreement are not to be deemed exclusive and the Subadviser shall be
free to render similar services to others, as long as such services do
not impair the services rendered to the Manager or the Trust.
(g) The Subadviser shall promptly notify the Manager of any financial
condition that is likely to impair the Subadviser's ability to fulfill
its commitment under this Agreement.
(h) The Subadviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
securities held in a Fund's portfolio. The Manager shall instruct the
custodian and other parties providing services to the Fund to promptly
forward misdirected proxies to the Subadviser.
2. Delivery of Documents to the Manager. The Subadviser has furnished the
Manager with copies of each of the following documents:
(a) The Subadviser's current Form ADV and any amendments thereto;
(b) The Subadviser's most recent balance sheet;
(c) Separate lists of persons whom the Subadviser wishes to have
authorized to give written and/or oral instructions to the custodian
and the fund accounting agent of Trust assets for the Funds; and
(d) The Code of Ethics of the Subadviser as currently in effect.
The Subadviser will furnish the Manager from time to time with copies,
properly certified or otherwise authenticated, of all material amendments
of or supplements to the foregoing, if any. Additionally, the Subadviser
will provide to the Manager such other documents relating to its services
under this Agreement as the Manager may reasonably request on a periodic
basis. Such amendments or supplements as to items (a) through (d) above
will be provided within 30 days of the time such materials became available
to the Subadviser.
3. Expenses. The Subadviser shall pay all of its expenses arising from the
performance of its obligations under Section 1.
4. Compensation. The Manager shall pay to the Subadviser for its services
hereunder, and the Subadviser agrees to accept as full compensation
therefor, a fee with respect to each Fund as set forth on Schedule B. Such
fee shall be accrued daily on the basis of the value of the portion of the
average daily net assets of the applicable Fund as are then being managed
by the Subadviser and shall be payable monthly. If the Subadviser shall
serve hereunder for less than the whole of any month, the fee hereunder
shall be prorated accordingly.
5. Purchase and Sale of Securities. The Subadviser will determine the
securities to be purchased or sold -------------------------------- with
respect to the portion of each Fund's portfolio assets being managed by it,
and shall purchase securities from or through and sell securities to or
through such persons, brokers or dealers as the Subadviser shall deem
appropriate in order to carry out the policy with respect to allocation of
portfolio transactions as set forth in the prospectuses and statements of
additional information (including amendments) of the Funds or as the
Trust's Board of Trustees may direct from time to time. In providing the
Funds with investment management and supervision, it is recognized that the
Subadviser will seek the most favorable price and execution, and,
consistent with such policy, may give consideration to the research
services furnished by brokers or dealers to the Subadviser for its use and
to such other considerations as the Trust's Board of Trustees may direct or
authorize from time to time.
Nothing in this Agreement shall be implied to prevent (i) the Manager from
engaging other subadvisers to provide investment advice and other services
in relation to series of the Trust, or a portion of the portfolio assets of
any such series, for which the Subadviser does not provide such services,
or to prevent the Manager from providing such services itself in relation
to such series; or (ii) the Subadviser from providing investment advice and
other services to other funds or clients.
In the performance of its duties hereunder, the Subadviser is and shall be
an independent contractor and except as expressly provided herein or
otherwise authorized in writing, shall have no authority to act for or
represent the Trust, the Funds, any other series of the Trust or the
Manager in any way or otherwise be deemed to be an agent of the Trust, the
Funds, any other series of the Trust or the Manager.
6. Term of Agreement. This Agreement shall continue in full force and effect
until February 1, 2001, and from year to year thereafter if such
continuance is approved in the manner required by the 1940 Act if the
Subadviser shall not have notified the Manager in writing at least 60 days
prior to such February 1 or prior to February 1 of any year thereafter that
it does not desire such continuance. This Agreement may be terminated at
any time, without payment of penalty by a Fund, by vote of the Trust's
Board of Trustees or a majority of the outstanding voting securities of the
applicable Fund (as defined by the 1940 Act), or by the Manager or by the
Subadviser upon 60 days' written notice. This Agreement will automatically
terminate in the event of its assignment (as defined by the 1940 Act) or
upon the termination of the Advisory Agreement or if (a) either party is
unable to pay its debts or an administrative or insolvency order is made in
respect of a party pursuant to its relevant governing and applicable laws
and regulations or (b) a party commits a material breach of any of the
terms or conditions of this Agreement and such breach shall continue 30
days after notice in writing, specifying the breach and requiring the same
to be remedied, has been given.
7. Amendments. This Agreement may be amended by consent of the parties hereto
provided that the consent of the applicable Fund is obtained in accordance
with the requirements of the 1940 Act.
8. Confidential Treatment. It is understood that any information or
recommendation supplied by the Subadviser in connection with the
performance of its obligations hereunder is to be regarded as confidential
and for use only by the Manager, the Trust or such persons as the Manager
may designate in connection with the Funds. It is also understood that any
information supplied to the Subadviser in connection with the performance
of its obligations hereunder, particularly, but not limited to, any list of
securities which, on a temporary basis, may not be bought or sold for the
Funds, is to be regarded as confidential and for use only by the Subadviser
in connection with its obligation to provide investment advice and other
services to the Funds.
9. Representations and Warranties. The Subadviser hereby represents and
warrants as follows:
(a) The Subadviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act
and the rules and regulations thereunder;
(b) The Subadviser has all requisite authority to enter into, execute,
deliver and perform the Subadviser's obligations under this Agreement;
(c) The Subadviser's performance of its obligations under this Agreement
does not conflict with any law, regulation or order to which the
Subadviser is subject; and
(d) The Subadviser has reviewed the portion of (i) the registration
statement filed with the SEC, as amended from time to time, for the
Funds ("Registration Statement"), and (ii) each Fund's prospectuses
and statements of additional information (including amendments)
thereto, in each case in the form received from the Manager with
respect to the disclosure about the Subadviser and the Funds of which
the Subadviser has knowledge (the "Subadviser and Fund Information")
and except as advised in writing to the Manager such Registration
Statement, prospectuses and statements of additional information
(including amendments) contain, as of their respective dates, no
untrue statement of any material fact of which the Subadviser has
knowledge and do not omit any statement of a material fact of which
the Subadviser has knowledge which was required to be stated therein
or necessary to make the statements contained therein not misleading.
10. Covenants. The Subadviser hereby covenants and agrees that, so long as this
Agreement shall remain in effect:
(a) The Subadviser shall maintain the Subadviser's registration as an
investment adviser under the Advisers Act, and such registration shall
at all times remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Subadviser's performance of its obligations under this Agreement
shall not conflict with any law, regulation or order to which the
Subadviser is then subject;
(c) The Subadviser shall at all times comply with the Advisers Act and the
1940 Act, and all rules and regulations thereunder, and all other
applicable laws and regulations, and the Registration Statement,
prospectuses and statements of additional information (including
amendments) and with any applicable procedures adopted by the Trust's
Board of Trustees, provided that such procedures are substantially
similar to those applicable to similar funds for which the Trust's
Board of Trustees is responsible and that such procedures are
identified in writing to the Subadviser;
(d) The Subadviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the
Subadviser from performing its duties under this Agreement. The
Subadviser shall promptly notify the Manager and the Fund if there are
any changes to its organizational structure or the Subadviser has
become the subject of any adverse regulatory action imposed by any
regulatory body or self-regulatory organization. The Subadviser
further agrees to notify Manager of any changes relating to it or the
provision of services by it that would cause the Registration
Statement, prospectuses or statements of additional information
(including amendments) for the Funds to contain any untrue statement
of a material fact or to omit to state a material fact which is
required to be stated therein or is necessary to make the statements
contained therein not misleading, in each case relating to Subadviser
and Fund Information; and
(e) The Subadviser will manage the portion of each Fund's portfolio assets
for which it serves as subadviser under this Agreement in a manner
consistent with the Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code.
11. Use of Names.
(a) The Subadviser acknowledges and agrees that the names Ivy Fund and Ivy
Management, Inc, and abbreviations or logos associated with those
names, are the valuable property of Manager and its affiliates; that
the Funds, the Manager and their affiliates have the right to use such
names, abbreviations and logos; and that the Subadviser shall use the
names Ivy Fund and Ivy Management, Inc., and associated abbreviations
and logos, only in connection with the Subadviser's performance of its
duties hereunder. Further, in any communication with the public and in
any marketing communications of any sort, Subadviser agrees to obtain
prior written approval from Manager before using or referring to Ivy
Fund, and Ivy Management, Inc, or the Funds or any abbreviations or
logos associated with those names; provided that nothing herein shall
be deemed to prohibit the Subadviser from referring to the performance
of the Funds in the Subadviser's marketing material as long as such
marketing material does not constitute "sales literature" or
"advertising" for the Funds, as those terms are used in the rules,
regulations and guidelines of the SEC and the National Association of
Securities Dealers, Inc.
(b) The Manager acknowledges that "Henderson" and "Henderson Investors"
and abbreviations or logos associated with those names are valuable
proerty of the AMP group of companies and are distinctive in
connection with investment advisory and related services provided by
the Subadviser, the "Henderson" name is a property right of the
Subadviser, and the "Henderson" and "Henderson Investors" names are
understood to be used by each Fund upon the conditions hereinafter set
forth; provided that each Fund may use such names only so long as the
Subadviser shall be retained as the investment subadviser of the Fund
pursuant to the terms of this Agreement.
(c) The Subadviser acknowledges that each Fund and its agents may use the
"Henderson" and "Henderson Investors" names in connection with
accurately describing the activities of the Fund, including use with
marketing and other promotional and informational material relating to
the Fund with the prior written approval always of the Subadviser. In
the event that the Subadviser shall cease to be the investment
subadviser of a Fund, then the Fund at its own or the Manager's
expense, upon the Subadviser's written request: (i) shall cease to use
the Subadviser's name for any commercial purpose; and (ii) shall use
its best efforts to cause the Fund's officers and trustees to take any
and all actions which may be necessary or desirable to effect the
foregoing and to reconvey to the Subadviser all rights which a Fund
may have to such name. Manager agrees to take any and all reasonable
actions as may be necessary or desirable to effect the foregoing and
Subadviser agrees to allow the Funds and their agents a reasonable
time to effectuate the foregoing.
(d) The Subadviser hereby agrees and consents to the use of the
Subadviser's name upon the foregoing terms and conditions.
12. Reports by the Subadviser and Records of the Funds. The Subadviser shall
furnish the Manager monthly, quarterly and annual reports concerning
transactions and performance of the Funds, including information required
to be disclosed in the Trust's Registration Statement, in such form as may
be mutually agreed, to review the Funds and to discuss the management of
them. The Subadviser shall permit the financial statements, books and
records with respect to the Funds to be inspected and audited by the Trust,
the Manager or their agents at all reasonable times during normal business
hours. The Subadviser shall immediately notify and forward to both the
Manager and legal counsel for the Trust any legal process served upon it on
behalf of the Manager or the Trust. The Subadviser shall promptly notify
the Manager of any changes in any information concerning the Subadviser of
which the Subadviser becomes aware that would be required to be disclosed
in the Trust's Registration Statement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Subadviser agrees that all records it maintains for the Trust are the
property of the Trust and further agrees to surrender promptly to the Trust
or the Manager any such records upon the Trust's or the Manager's request.
The Subadviser further agrees to maintain for the Trust the records the
Trust is required to maintain under Rule 31a-1(b) insofar as such records
relate to the investment affairs of each Fund. The Subadviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for the Trust.
13. Indemnification. The Subadviser agrees to indemnify and hold harmless the
Manager, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act ("affiliated person") of the Manager and each person, if any who,
within the meaning of Section 15 of the Securities Act of 1933, as amended
(the "1933 Act"), controls ("controlling person") the Manager, against any
and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses), to which the Manager, the Trust or
such affiliated person or controlling person may become subject under the
1933 Act, the 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of Subadviser's responsibilities as
subadviser of the Funds (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence of the Subadviser, any of the
Subadviser's employees or representatives or any affiliate of or any person
acting on behalf of the Subadviser, or (2) as a result of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, prospectuses or statements of additional
information covering the Funds or the Trust or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading, if such a statement or omission was made
in reliance upon written information furnished by the Subadviser to the
Manager, the Trust or any affiliated person of the Manager or the Trust
expressly for use in the Trust's Registration Statement, or upon verbal
information confirmed by the Subadviser in writing expressly for use in the
Trust's Registration Statement or (3) to the extent of, and as a result of,
the failure of the Subadviser to execute, or cause to be executed,
portfolio transactions according to the standards and requirements of the
1940 Act; provided, however, that in no case is the Subadviser's indemnity
in favor of the Manager or any affiliated person or controlling person of
the Manager deemed to protect such person against any liability to which
any such person would otherwise be subject by reason of willful misconduct,
bad faith or gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties under this
Agreement.
The Manager agrees to indemnify and hold harmless the Subadviser, any
affiliated person within the meaning of Section 2(a)(3) of the 1940 Act
("affiliated person") of the Subadviser and each person, if any who, within
the meaning of Section 15 of the 1933 Act, controls ("controlling person")
the Subadviser, against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Subadviser or such affiliated person or controlling person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Manager's
responsibilities as investment manager of the Funds (1) to the extent of
and as a result of the willful misconduct, bad faith, or gross negligence
by the Manager, any of the Manager's employees or representatives or any
affiliate of or any person acting on behalf of the Manager, or (2) as a
result of any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, prospectuses or statements of
additional information covering the Funds or the Trust or any amendment
thereof or any supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading, if such a statement or omission
was made by the Trust other than in reliance upon written information
furnished by the Subadviser, or any affiliated person of the Subadviser,
expressly for use in the Trust's Registration Statement or other than upon
verbal information confirmed by the Subadviser in writing expressly for use
in the Trust's Registration Statement; provided, however, that in no case
is the Manager's indemnity in favor of the Subadviser or any affiliated
person or controlling person of the Subadviser deemed to protect such
person against any liability to which any such person would otherwise be
subject by reason of willful misconduct, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
14. Jurisdiction. The Subadviser irrevocably submits to the jurisdiction of any
state or U.S. federal court sitting in the Commonwealth of Massachusetts
over any suit, action or proceeding arising out of or relating to this
proposal and the agreement contemplated herein. The Subadviser irrevocably
waives, to the fullest extent permitted by law, any objection which it may
have to the laying of the venue of any such suit, action or proceeding
brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient
forum. The Subadviser agrees that final judgment in any such suit, action
or proceeding brought in such a court shall be conclusive and binding upon
the Subadviser, and may be enforced to the extent permitted by applicable
law in any court of the jurisdiction of which the Subadviser is subject by
a suit upon such judgment, provided that service of process is effected
upon the Subadviser in the manner specified in the following paragraph or
as otherwise permitted by law.
As long as the agreement contemplated herein remains in effect, the
Subadviser will at all times have an authorized agent in the Commonwealth
of Massachusetts upon whom process may be served in any legal action or
proceeding in a state or U.S. federal court sitting in the Commonwealth of
Massachusetts over any suit, action or proceeding arising out of or
relating to this proposal or the agreement contemplated herein. The
Subadviser hereby appoints CT Corporation System as its agent for such
purpose, and covenants and agrees that service of process in any such legal
action or proceeding may be made upon it at the office of such agent at 2
Oliver Street, Boston, MA 02019 (or at such other address in the
Commonwealth of Massachusetts, as said agent may designate by written
notice to the Subadviser and the Manager). The Subadviser hereby consents
to the process being served in any suit, action or proceeding of the nature
referred to in the preceding paragraph by service upon such agent together
with the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Subadviser set
forth in Section 15 below or to any other address of which the Subadviser
shall have given written notice to the Manager. The Subadviser irrevocably
waives, to the fullest extent permitted by law, all claim of error by
reason of any such service (but does not waive any right to assert lack of
subject matter jurisdiction) and agrees that such service (i) shall be
deemed in every respect effective service of process upon the Subadviser in
any suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Subadviser.
Nothing in this Section 14 shall affect the right of the Manager to serve
process in any manner permitted by law or limit the right of the Manager to
bring proceedings against the Subadviser in the courts of any jurisdiction
or jurisdictions.
15. Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such
other address as the relevant addressee shall hereafter notify for such
purpose to the others by notice in writing and shall be deemed to have been
given at the time of delivery.
If to the Manager: IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432, U.S.A.
Attention: C. William Ferris
If to the Trust: IVY FUND
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432, U.S.A.
Attention: C. William Ferris
If to the Subadviser: HENDERSON INVESTMENT MANAGEMENT LIMITED
3 Finsbury Avenue
London EC2M 2PA
United Kingdom
Attention: Sean Dranfield and the Company Secretary
16. Limitation of Liability of the Trust, its Trustees, and Shareholders. It is
understood and expressly stipulated that none of the trustees, officers,
agents, or shareholders of any series of the Trust shall be personally
liable hereunder. It is understood and acknowledged that all persons
dealing with any series of the Trust must look solely to the property of
such series for the enforcement of any claims against that series as
neither the trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of any series of the
Trust. No series of the Trust shall be liable for the obligations or
liabilities of any other series of the Trust.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts. Anything
herein to the contrary notwithstanding, this Agreement shall not be
construed to require, or to impose any duty upon either of the parties, to
do anything in violation of any applicable laws or regulations.
18. Severability. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors.
19. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all such counterparts shall
constitute a single instrument.
IN WITNESS WHEREOF, IVY MANAGEMENT, INC. AND HENDERSON INVESTMENT
MANAGEMENT LIMITED have each caused this instrument to be signed in duplicate on
its behalf by the officer designated below thereunto duly authorized.
IVY MANAGEMENT, INC.
By: C. WILLIAM FERRIS
Title: Senior Vice President
HENDERSON INVESTMENT MANAGEMENT LIMITED
By: Sean Dranfield
Title: Executive Director
<PAGE>
SCHEDULE A
TO SUBADVISORY AGREEMENT BETWEEN
IVY MANAGEMENT, INC. AND HENDERSON INVESTMENT MANAGEMENT LIMITED
DATED FEBRUARY 1, 1999
-----------------------------------
Funds:
Ivy International Small Companies Fund - 50% of Fund's net assets
<PAGE>
SCHEDULE B
TO SUBADVISORY AGREEMENT BETWEEN
IVY MANAGEMENT, INC. AND HENDERSON INVESTMENT MANAGEMENT LIMITED
DATED FEBRUARY 1, 1999
----------------------------------
Fee schedule:
Ivy International Small Companies Fund: payable monthly at an annual rate of
0.50% of the portion of the Fund's average daily net assets managed by the
Subadviser.
AMENDMENT TO SCHEDULE A TO SUBADVISORY AGREEMENT
This Amendment ("the Amendment") to Schedule A to the Subadvisory Agreement (the
"Agreement") by and between IVY MANAGEMENT, INC., a Massachusetts corporation,
and HENDERSON INVESTMENT MANAGEMENT LIMITED , an United Kingdom corporation,
dated 1 February 1999 (the "Agreement"), is made as of April 30, 1999.
The Amendment shall take effect as of April 30th, 1999.
Except as provided herein, the terms and provisions of the Agreement shall
remain in full force and effect without amendment.
Executed under seal this 29th of April, 1999. SIGNED by:
IVY MANAGEMENT, INC.
By: C. WILLIAM FERRIS
Senior Vice President
Title
HENDERSON INVESTMENT MANAGEMENT LIMITED
By: Sean Dranfield
Executive Director
Title
<PAGE>
AMENDMENT TO SUBADVISORY AGREEMENT
This Amendment ("the Amendment") to the Subadvisory Agreement (the "Agreement")
by and between IVY MANAGEMENT, INC., a Massachusetts corporation, and HENDERSON
INVESTMENT MANAGEMENT LIMITED, an United Kingdom corporation, dated February 1,
1999 (the "Agreement"), is made as of April 30, 1999.
Pursuant to Section 7 of the Agreement, the Agreement is hereby amended in its
entirety as follows:
1. The list of funds and assets under management set out in Schedule A to
the Agreement is hereby replaced in its entirety with the following
list:
Ivy International Small Companies Fund - 50% of Fund's net assets
Ivy European Opportunities Fund - 100% of Fund's net assets
2. The fee schedule set out in Schedule B to the Agreement is hereby
replaced in its entirety with the following fee schedule: Ivy
International Small Companies Fund - payable monthly at an annual rate
of 0.50% of the portion of the Fund's average daily net assets managed
by the Subadviser. Ivy European Opportunities Fund - payable monthly at
an annual rate of 0.50% of the portion of the Fund's average daily net
assets managed by the Subadviser.
Except as provided herein, the terms and provisions of the Agreement shall
remain in full force and effect without amendment.
Executed under seal this 29th of April, 1999. SIGNED by:
IVY MANAGEMENT, INC.
By: C. WILLIAM FERRIS
C. William Ferris, Senior Vice President
HENDERSON INVESTMENT MANAGEMENT LIMITED
By: SEAN DRANFIELD
Sean Dranfield, Executive Director
EXHIBIT e(14)
IVY FUND
ADDENDUM TO
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Ivy International Strategic Bond Fund
Class A, Class B, Class C, Class I and Advisor Class Shares
AGREEMENT made as of the 5th day of December, 1998, by and between Ivy Fund
(the "Trust") and Ivy Mackenzie Distributors, Inc. ("IMDI")(formerly "Mackenzie
Ivy Funds Distribution, Inc.").
WHEREAS, the Trust is registered as an open-end investment company
under the Investment Company Act of 1940, as amended, and consists of one or
more separate investment portfolios, as may be designated from time to time; and
WHEREAS, IMDI serves as the Trust's distributor pursuant to an Amended
and Restated Distribution Agreement dated October 23, 1993 (the "Agreement");
and
WHEREAS, the Trustees of the Trust, at a meeting held on December 4-5,
1998, duly approved an amendment to the Agreement to include the Class A, Class
B, Class C, Class I and Advisor Class shares (the "Shares") of Ivy International
Strategic Bond Fund (the "Fund"); and
WHEREAS, the Shares were established and designated by the Board of
Trustees of the Trust by written consent made effective as of the date that the
Registration Statement for the Fund was filed with the Securities and Exchange
Commission ("SEC") in accordance with Rule 485(a)(2) under the Securities Act of
1933 (the "Securities Act").
NOW THEREFORE, the Trust and IMDI hereby agree as follows:
Effective as of the date that the Registration Statement
pertaining to Ivy International Strategic Bond Fund was filed
with the SEC pursuant to Rule 485(a)(1) under the Securities
Act, the Agreement shall relate in all respects to the Shares,
in addition to the classes of shares of the Funds and any
other series of the Trust specifically identified in Paragraph
1 of the Agreement and any other Addenda thereto.
IN WITNESS WHEREOF, the Trust and IMDI have adopted this Addendum as of
the date first set forth above.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MACKENZIE DISTRIBUTORS, INC.
By: KEITH J. CARLSON
Keith J. Carlson, President
EXHIBIT e(15)
IVY FUND
ADDENDUM TO
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Ivy European Opportunities Fund
Class A, Class B, Class C, Class I and Advisor Class Shares
AGREEMENT made as of the 5th day of February, 1999, by and between Ivy Fund
(the "Trust") and Ivy Mackenzie Distributors, Inc. ("IMDI")(formerly "Mackenzie
Ivy Funds Distribution, Inc.").
WHEREAS, the Trust is registered as an open-end investment company
under the Investment Company Act of 1940, as amended, and consists of one or
more separate investment portfolios, as may be designated from time to time; and
WHEREAS, IMDI serves as the Trust's distributor pursuant to an Amended
and Restated Distribution Agreement dated October 23, 1993 (the "Agreement");
and
WHEREAS, the Trustees of the Trust, at a meeting held on February 5,
1999, duly approved an amendment to the Agreement to include the Class A, Class
B, Class C, Class I and Advisor Class shares (the "Shares") of Ivy European
Opportunities Fund (the "Fund").
WHEREAS, the Shares were established and designated by the Board of
Trustees of the Trust by written consent made effective as of the date that the
Registration Statement for the Fund was filed with the Securities and Exchange
Commission ("SEC") in accordance with Rule 485(a)(2) under the Securities Act of
1933 (the "Securities Act").
NOW THEREFORE, the Trust and IMDI hereby agree as follows:
Effective as of the date that the Registration Statement
pertaining to Ivy European Opportunities Fund was filed with
the SEC pursuant to Rule 485(a)(2) under the Securities Act,
the Agreement shall relate in all respects to the Shares, in
addition to the classes of shares of the Funds and any other
series of the Trust specifically identified in Paragraph 1 of
the Agreement and any other Addenda thereto.
IN WITNESS WHEREOF, the Trust and IMDI have adopted this Addendum as of
the date first set forth above.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MACKENZIE DISTRIBUTORS, INC.
By: KEITH J. CARLSON
Keith J. Carlson, President
Ivy Mackenzie Distributors, Inc.
700 South Federal Highway, Suite 300
Boca Raton, Florida 33432
IVY FUND
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Distributor") as follows:
1. The Trust is an open-end management investment company that currently
has twenty investment portfolios and that may create additional portfolios in
the future. One or more separate classes of shares of beneficial interest in the
Trust is offered to investors with respect to each portfolio. This Agreement
relates to Class A, Class B, Class C, Class I (if applicable) and the Advisor
Class of Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region
Fund, Ivy Developing Nations Fund, Ivy European Opportunities 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 International
Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue
Chip Fund and Ivy US Emerging Growth Fund (the "Equity and Fixed Income Funds"),
to Ivy Money Market Fund and to such other portfolios as shall be designated
from time to time by the Board of Trustees in any supplement to a Plan (together
with the Equity and Fixed Income Funds, the "Funds"). The Trust engages in the
business of investing and reinvesting the assets of the Funds in the manner and
in accordance with their respective investment objectives and restrictions as
specified in the currently effective Prospectuses (the "Prospectuses") relating
to the Funds included in the Trust's Registration Statement, as amended from
time to time (the "Registration Statement"), filed by the Trust under the
Investment Company Act of 1940, as amended, (the "1940 Act") and the Securities
Act of 1933, as amended, (the "1933 Act"). Copies of the documents referred to
in the preceding sentence have been furnished to the Distributor. Any amendments
to those documents shall be furnished to the Distributor promptly. The Trust has
adopted a separate Distribution Plan (each, a "Plan") for Class A, Class B and
Class C of each of the Equity and Fixed Income Funds pursuant to Rule 12b-1
under the 1940 Act.
2. As the Trust's agent, the Distributor shall be the exclusive distributor
for the unsold portion of shares of beneficial interest in Ivy Money Market Fund
and Class A, Class B and Class C, Class I (if applicable) and the Advisor Class
shares of beneficial interest in the Equity and Fixed Income Funds (the
"Shares") which may from time to time be registered under the 1933 Act. All of
the terms of this Amended and Restated Distribution Agreement are intended to
apply to the sale of all Shares whether issued prior to the date of this Amended
and Restated Distribution Agreement or thereafter.
3. The Trust shall sell the Shares to eligible investors as described in
the Prospectuses through the Distributor, as the Trust's agent. All orders for
Shares received by the Distributor shall be subject to acceptance and
confirmation by the Trust. The Trust shall have the right, at its election, to
deliver either (i) Shares issued upon original issue or (ii) treasury shares.
4. As the Trust's agent, the Distributor may sell and distribute the Shares
in such manner not inconsistent with the provisions hereof and the Trust's
Prospectuses as the Distributor may determine from time to time. In this
connection, the Distributor shall comply with all laws, rules and regulations
applicable to it, including, without limiting the generality of the foregoing,
all applicable rules or regulations under the 1940 Act and of any securities
association registered under the Securities Exchange Act of 1934, as amended
(the "1934 Act").
5. To the extent permitted by its then effective Prospectuses, the Trust
reserves the right to sell the Shares to purchasers to the extent that it or the
transfer agent for the Shares receives purchase requests therefor. The Trust
reserves the right to refuse at any time or times to sell any Shares for any
reason deemed adequate by it.
6. All Shares offered for sale and sold by the Distributor shall be offered
for sale and sold by the Distributor to designated investors at the price per
Share specified and determined as provided in the Funds' Prospectuses, including
any applicable reduction or elimination of sales charges with respect to Class A
Shares of the Equity and Fixed Income Funds as provided in the Equity and Fixed
Income Funds' Prospectus (the "offering price"). The Trust shall determine and
promptly furnish to the Distributor a statement of the offering price at least
once on each day on which the New York Stock Exchange is open for trading. Each
offering price shall become effective at the time and shall remain in effect
during the period specified in the statement. Each such statement shall show the
basis of its computation.
7. (a) The Distributor shall be entitled to deduct a commission on
all Class A Shares sold equal to the difference, if any, between
the offering price and the net asset value on which such price is
based. If any such commission is received by a Fund, it will pay
such commission to the Distributor. Out of such commission, the
Distributor may allow to dealers such concession as the
Distributor may determine from time to time. Notwithstanding
anything in this Agreement otherwise provided, sales may be made
at net asset value as provided in the Prospectuses for the Funds.
(b) The Distributor shall be entitled to deduct a contingent deferred
sales charge ("CDSC") on the redemption of certain Class A, Class
B and Class C Shares in accordance with, and in the manner set
forth in, the Equity and Fixed Income Funds' Prospectuses. The
Distributor may reallow any or all of such contingent deferred
sales charges to dealers as the Distributor may determine from
time to time. Notwithstanding anything in this Agreement
otherwise provided, the Distributor may waive the contingent
deferred sales charge as disclosed in the Equity and Fixed Income
Funds' Prospectuses.
(c) In respect of the Class B Shares of each Fund, the
following provisions shall apply:
(i) In consideration of the Distributor's services as principal
distributor of the Fund's Class B Shares pursuant to this
contract and the Fund's distribution plan in respect of such
Shares (the "Class B Plan"), the Trust, on behalf of such
Fund, agrees: (I) to pay to the Distributor monthly in
arrears its "Allocable Portion" (as hereinafter defined) of
a fee (the "Distribution Fee") which shall accrue daily in
an amount equal to the product of (A) the daily equivalent
of 0.75% per annum multiplied by (B) the net asset value of
the Class B Shares of the Fund outstanding on such day, and
(II) to withhold from redemption proceeds the Distributor's
Allocable Portion of the CDSCs and to pay the same over to
the Distributor or at its direction.
(ii) Each of the provisions set forth in clauses (I) through (V)
of the third sentence of paragraph 2 of the Class B Plan as
in effect on the date hereof, together with the related
definitions and the Allocation Schedule attached hereto as
Exhibit A, are hereby incorporated herein by reference with
the same force and effect as if set forth herein in their
entirety.
8. The Trust shall furnish the Distributor from time to time, for use in
connection with the sale of Shares, such information with respect to the Trust
as the Distributor may reasonably request. The Trust represents and warrants
that such information, when signed by one of its officers, shall be true and
correct. The Trust also shall furnish to the Distributor copies of its reports
to its shareholders and such additional information regarding the Trust's
financial condition as the Distributor may reasonably request from time to time.
9. The Registration Statement and the Prospectuses have been or will be, as
the case may be, prepared in conformity with the 1933 Act, the 1940 Act and the
rules and regulations of the Securities and Exchange Commission (the "SEC"). The
Trust represents and warrants to the Distributor that the Registration Statement
and the Prospectuses contain or will contain all statements required to be
stated therein in accordance with the 1933 Act, the 1940 Act and the rules and
regulations thereunder, that all statements of fact contained or to be contained
therein are or will be true and correct at the time indicated or the effective
date, as the case may be, and that neither the Registration Statement nor the
Prospectuses, when they shall become effective under the 1933 Act or be
authorized for use, shall include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading to a purchaser of Shares. The Trust shall
from time to time file such amendment or amendments to the Registration
Statement and the Prospectuses as, in the light of future developments, shall,
in the opinion of the Trust's counsel, be necessary in order to have the
Registration Statement and the Prospectuses at all times contain all material
facts required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of Shares. The Trust represents and warrants to
the Distributor that any amendment to the Registration or the Prospectuses filed
hereafter by the Trust will, when it becomes effective under the 1933 Act,
contain all statements required to be stated therein in accordance with the 1933
Act, the 1940 Act and the rules and regulations thereunder, that all statements
of fact contained therein will, when the same shall become effective, be true
and correct, and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares.
10. The Trust shall prepare and furnish to the Distributor from time to
time such number of copies of the most recent form of the Prospectuses for the
Funds filed with the SEC as the Distributor may reasonably request. The Trust
authorizes the Distributor to use the Prospectuses, in the form furnished to the
Distributor from time to time, in connection with the sale of Shares. The Trust
shall indemnify, defend and hold harmless the Distributor, its officers and
directors and any person who controls the Distributor within the meaning of the
1933 Act, from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) that the
Distributor, its officers and directors or any such controlling person may incur
under the 1933 Act, the 1940 Act, the common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectuses or arising out of or based upon any
alleged omission to state a material fact required to be stated in either or
necessary to make the statements in either not misleading. This contract shall
not be construed to protect the Distributor against any liability to the Trust
or its shareholders to which the Distributor would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this contract. This indemnity agreement and the Trust's
representations and warranties in this contract shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Distributor, its officers and directors or any such controlling person. This
indemnity agreement shall inure exclusively to the benefit of the Distributor
and its successors, the Distributor's officers and directors and their
respective estates and any such controlling persons and their successors and
estates.
11. The Distributor agrees to indemnify, defend and hold harmless the
Trust, its officers and Trustees and any person who controls the Trust within
the meaning of the 1933 Act, from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) that the Trust, its officers or Trustees or any such controlling
person, may incur under the 1933 Act, the 1940 Act, the common law or otherwise,
but only to the extent that such liability or expenses incurred by the Trust,
its officers or Trustees or such controlling person resulting from such claims
or demands shall arise out of or be based upon any untrue statement of a
material fact contained in information furnished in writing by the Distributor
to the Trust specifically for use in the Registration Statement or the
Prospectuses or shall arise out of or based upon any omission to state a
material fact in connection with such information required to be stated in the
Registration Statement or the Prospectuses or necessary to make such information
not misleading.
12. No Shares shall be sold through the Distributor or by the Trust under
this contract and no orders for the purchase of Shares shall be confirmed or
accepted by the Trust if and so long as the effectiveness of the Registration
Statement shall be suspended under any of other provisions of the 1933 Act.
Nothing contained in this paragraph 12 shall in any way restrict, limit or have
any application to or bearing upon the Trust's obligation to redeem Shares from
any shareholder in accordance with the provisions of its Agreement and
Declaration of Trust. The Trust will use its best efforts at all times to have
the Shares effectively registered under the 1933 Act.
13. The Trust agrees to advise the Distributor immediately:
(a) of any request by the SEC for amendments to the Registration
Statement or the Funds' Prospectuses or for additional
information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
Funds' Prospectuses under the 1933 Act or the initiation of any
proceedings for that purpose;
(c) of the happening of any material event that makes untrue any
statement made in the Registration Statement or the Funds'
Prospectuses or that requires the making of a change in either
thereof in order to make the statements therein not misleading;
and
(d) of all actions of the SEC with respect to any amendments to the
Registration Statement or the Funds' Prospectuses that may from
time to time be filed with the SEC under the 1933 Act or the 1940
Act.
14. Insofar as they concern the Trust, the Trust shall comply with all
applicable laws, rules and regulations, including, without limiting the
generality of the foregoing, all rules and regulations made or adopted pursuant
to the 1933 Act, the 1940 Act or by any securities association registered under
the 1934 Act.
15. The Distributor may, if it desires and at its own cost and expense,
appoint or employ agents to assist it in carrying out its obligations under this
contract, but no such appointment or employment shall relieve the Distributor of
any of its responsibilities or obligations to the Trust under this contract.
16. (a) The Distributor shall from time to time employ or associate with
it such persons as it believes necessary to assist it in carrying out
its obligations under this contract. The compensation of such persons
shall be paid by the Distributor.
(b) The Trust shall execute all documents and furnish any information
that may be reasonably necessary in connection with the
qualification of the Shares for sale in jurisdictions designated
by the Distributor.
17. The Distributor shall pay all expenses incurred in connection with its
qualification as a dealer or broker under Federal or state law. It is understood
and agreed that, so long as any Plan continues in effect, any expenses incurred
by the Distributor hereunder (as well as any other expenses that may be
permitted to be paid pursuant to a Plan) may be paid from amounts received by it
from the Trust under such Plan. The Trust shall be responsible for all of its
expenses and liabilities, including: (i) the fees and expenses of the Trust's
Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust; (ii) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with the Distributor; (iii) interest expenses;
(iv) taxes and governmental fees, including an original issue taxes or transfer
taxes applicable to the sale or delivery of Shares or certificates therefor; (v)
brokerage commissions and other expenses incurred in acquiring or disposing of
portfolio securities; (vi) the expenses of registering and qualifying Shares for
sale with the SEC and with various state securities commissions; (vii)
accounting and legal costs; (viii) insurance premiums; (ix) fees and expenses of
the Trust's Custodian and Transfer Agent and any related services; (x) expenses
of obtaining quotations of portfolio securities and of pricing Shares; (xi)
expenses of maintaining the Trust's legal existence and of shareholders'
meetings; (xii) expenses of preparing and distributing to existing shareholders
periodic reports, proxy materials and Prospectuses; (xiii) fees and expenses of
membership in industry organizations; and (xiv) expenses of qualification of the
Trust as a foreign corporation authorized to do business in any jurisdiction if
the distributor determines that such qualification is necessary or desirable.
18. This contract shall continue in effect automatically for successive
annual periods, provided such continuance is specifically approved at least
annually (i) by a vote of a majority of the Trustees who are not parties to the
contract or interested persons (as defined in the 1940 Act) of any such party
and who have no director or indirect financial interest in the operation of the
Plans or in any related agreement (the "Independent Trustees"), by vote cast in
person at a meeting called for the purpose of voting on such approval and (ii)
either (a) by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Funds or (b) by the vote of a majority of the
entire Board of Trustees. This contract may be terminated with respect to a Fund
at any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of that Fund (as defined in the 1940 Act) or by a
vote of a majority of the Independent Trustees of the Trust on 60 days' written
notice to the Distributor or by the Distributor on 60 days' written notice to
the Trust. This contract shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
19. Except to the extent necessary to perform the Distributor's obligations
under this contract, nothing herein shall be deemed to limit or restrict the
right of the Distributor, or any affiliate of the Distributor, or any employee
of the Distributor, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
20. This contract shall be construed in accordance with the laws of the
State of Florida to the extent such laws are consistent with the 1940 Act.
21. The Trust's Agreement and Declaration of Trust, as amended and
restated, has been filed with the Secretary of State of The Commonwealth of
Massachusetts. The obligations of the Trust are not personally binding upon, nor
shall resort be had to the private property of any of the Trustees,
shareholders, officers, employees or agents of the Trust, but only the Trust's
property shall be bound.
If the foregoing correctly sets forth the agreement between the Trust
and the Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
ACCEPTED:
IVY MACKENZIE DISTRIBUTORS, INC.
By: KEITH J. CARLSON
Keith J. Carlson, President
Dated: March 16, 1999
<PAGE>
SCHEDULE A
to the
Ivy Fund
Amended and Restated
Distribution Agreement
ALLOCATION PROCEDURES
The Distributor's Allocable Portion of Distribution Fees and Contingent
Deferred Sales Charges in respect of Shares (as hereinafter defined) of each
Fund shall be 100% until such time as the Distributor shall cease to serve as
exclusive distributor of Shares of such Fund; thereafter collections which
constitute Contingent Deferred Sales Charges, and Asset Based Sales Charges
related to Shares of such Fund shall be allocated among the Distributor and any
successor distributor ("Successor Distributor") in accordance with this Schedule
A.
Defined terms used in this Schedule (A) and not otherwise defined
herein shall have the meanings assigned to them in the Distribution Agreement.
As used herein the following terms shall have the meanings indicated:
"Commission Share" means in respect of any Fund, each Share of such
Fund, which is issued under circumstances which would normally give rise to an
obligation of the holder of such Share to pay a Contingent Deferred Sales Charge
upon redemption of such Share (including, without limitation, any Share of such
Fund issued in connection with a permitted free exchange) and any such Share
shall continue to be a Commission Share of such Fund prior to the redemption
(including a redemption in connection with a permitted free exchange) or
conversion of such Share, even though the obligation to pay the Contingent
Deferred Sales Charge may have expired or conditions for waivers thereof may
exist.
"Date of Original Issuance" means in respect of any Commission Share,
the date with reference to which the amount of the Contingent Deferred Sales
Charge payable on redemption thereof, if any, is computed.
"Free Share" means, in respect of any Fund, each Share of such Fund,
other than a Commission Share (including, without limitation, any Share issued
in connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of any Fund, the first date on which
such Fund issued Shares.
"Net Asset Value" means, (i) with respect to any Fund, as of the date
any determination thereof is made, the net asset value of such Fund computed in
the manner such value is required to be computed by such Fund in its reports to
its shareholders, and (ii) with respect to any Share of such Fund as of any
date, the quotient obtained by dividing: (A) the net asset value of such Fund
(as computed in accordance with clause (i) above) allocated to Shares of such
Fund (in accordance with the constituent documents for such Fund) as of such
date, by (B) the number of Shares of such Fund outstanding on such date.
"Omnibus Share" means, in respect of any Fund, a Commission Share or
Free Share sold by one of the Selling Agents listed on Exhibit I. If, subsequent
to closing of the Program, the Distributor and its Transferees reasonably
determine that the Transfer Agent is able to track all Commission Shares and
Free Shares sold by any of the Selling Agents listed on Exhibit I in the same
manner as Commission Shares and Free Shares are currently tracked in respect of
Selling Agents not listed on Exhibit 1, then Exhibit I shall be amended to
delete such Selling Agent from Exhibit I so that Commission Shares and Free
Shares sold by such Selling Agent will no longer be treated as Omnibus Shares.
"Shares" means Class B shares of each Fund.
II. PART I: ATTRIBUTION OF SHARES
Shares of each Fund, which are outstanding from time to time,
shall be attributed to the Distributor and each Successor Distributor in
accordance with the following rules;
A. Commission Shares other than omnibus Shares:
1. Commission Shares which are not Omnibus Shares attributed to the Distributor
shall be Commission Shares which are not Omnibus Shares the Date of Original
Issuance of which occurred on or after the Inception Date of such Fund and on or
prior to the date the Distributor ceased to be the exclusive distributor of
Shares of such Fund.
2. Commission Shares which are not Omnibus Shares attributable to each Successor
Distributor shall be Commission Shares which are not Omnibus Shares, the Date of
Original Issuance of which occurs after the date such Successor Distributor
became the exclusive distributor of Shares of such Fund and on or prior to the
date such Successor Distributor ceased to be the exclusive distributor of Shares
of such Fund.
3. A Commission Share which is not an Omnibus Share of a particular Fund (the
"Issuing Fund") issued in consideration of the investment of proceeds of the
redemption of a Commission Share which is not an Omnibus Share of another Fund
(the "Redeeming Fund") in connection with a permitted free exchange, is deemed
to have a Date of Original Issuance identical to the Date of Original Issuance
of the Commission Share of the Redeeming Trust and any such Commission Share
will be attributed to the Distributor or Successor Distributor based upon such
Date of Original Issuance in accordance with rules (a) and (b) above.
4. A Commission Share which is not an Omnibus Share redeemed (other than in
connection with a permitted free exchange) or converted to a Class A share is
attributable to the Distributor or a Successor Distributor based upon the Date
of Original Issuance in accordance with rule (a), (b) and (c) above.
B. Free Shares:
Free Shares which are not Omnibus Shares of any Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Commission
Shares which are not Omnibus Shares of such Fund outstanding on such date are
attributed to each on such date; provided that if the Distributor and its
Transferees reasonably determine that the Transfer Agent is able to produce
monthly reports which track the Date of Original Issuance for such Free Shares,
then such Free Shares shall be allocated pursuant to clause (l) (a), (b) and (c)
above.
C. Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be
attributed to the Distributor or a Successor Distributor, as the case may be, in
the same proportion that the Commission Shares which are not Omnibus Shares of
such Fund outstanding on such date are attributed to it on such date; provided
that if the Distributor and its Transferees reasonably determine that the
Transfer Agent is able to produce monthly reports which track the Date of
Original Issuance for the Omnibus Shares, then the Omnibus Shares shall be
allocated pursuant to clause (l) (a), (b) and (c) above.
III. PART II: ALLOCATION OF CONTINGENT DEFERRED SALES CHARGES ("CDSCS") A. CDSCs
Related to the Redemption of Commission Shares which are not Omnibus Shares:
CDSCs in respect of the redemption of Commission Shares which
are not Omnibus Shares shall be allocated to the Distributor or a Successor
Distributor depending upon whether the related redeemed Commission Share is
attributable to the Distributor or such Successor Distributor, as the case may
be, in accordance with Part I above.
B. CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of omnibus Shares shall be
allocated to the Distributor or a Successor Distributor in the same proportion
that CDSCs related to the redemption of Commission Shares are allocated to each
thereof; provided, that if the Distributor and its Transferees reasonably
determine that the Transfer Agent is able to produce monthly reports which track
the Date of Original Issuance for the Omnibus Shares, then the CDSCs in respect
of the redemption of Omnibus Shares shall be allocated among the Distributor and
any Successor Distributors depending on whether the related redeemed Omnibus
Share is attributable to the Distributor or a Successor Distributor, as the case
may be, in accordance with Part I above.
IV. PART III: ALLOCATION OF ASSET BASED SALES CHARGES
Assuming that the Asset Based Sales Charge remains constant
over time and among Funds so that Part IV hereof does not become operative:
A. The portion of the aggregate Asset Based Sales Charges accrued
in respect of all Shares of all Funds during any calendar
month allocable to the Distributor or a Successor Distributor
is determined by multiplying the total of such Asset Based
Sales Charges by the following fraction:
(A + C) /2
(B + D) /2
where:
A = The aggregate Net Asset Value of all Shares of all Funds
attributed to the Distributor or such Successor Distributor,
as the case may be, and outstanding at the beginning of such
calendar month.
B = The aggregate Net Asset Value of all Shares of all Funds at
the beginning of such calendar month.
C = The aggregate Net Asset Value of all Shares of all Funds
attributed to the Distributor or such Successor Distributor,
as the case may be, and outstanding at the end of such
calendar month.
D = The aggregate Net Asset Value of all Shares of all Funds
at the end of such calendar month. B. If the Distributor and
its Transferees reasonably determine that the Transfer Agent
is able to produce automated monthly reports which allocate
the average Net Asset Value of the Commission Shares (or all
Shares if available) of all Funds among the Distributor and
any Successor Distributors in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the
portion of the Asset Based Sales Charges accrued in respect
of all such Shares of all Funds during a particular calendar
month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Asset Based
Sales Charges by the following fraction:
(A) / (B)
where: A = Average Net Asset Value of all such Shares of all Funds
for such calendar month attributed to the Distributor or a
Successor Distributor, as the case may be.
B = Total average
Net Asset Value of all such Shares of all Funds for such
calendar month.
V. PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH
SUCCESSOR DISTRIBUTOR'S ALLOCABLE PORTION
The Parties to the Distribution Agreement recognize that, if the terms of
any distributor's contract, any distribution plan, any prospectus, the conduct
rules or any other applicable law change, which change disproportionately
reduces, in a manner inconsistent with the intent of this Distribution
Agreement, the amount of the Distributor's Allocable Portion or any Successor
Distributor's Allocable Portion had no such change occurred, the definitions of
the Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the Shares relating to the related Fund shall be adjusted
by agreement among the Distributor, its Transferees, each Successor Distributor
and the Company; provided, however, if the Distributor, its Transferees, the
Successor Distributors and the Company cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the conduct rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
AGREEMENT made as of this 19th day of September 1998 between IVY
FUND, a management investment company registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended, (the "Act"), acting through its Board of Directors/Trustees or its
duly appointed representative (the "Fund"), and BROWN BROTHERS HARRIMAN & CO., a
New York limited partnership with an office in Boston, Massachusetts (the
"Delegate").
WITNESSETH
WHEREAS the Fund has appointed the Delegate as custodian (the
"Custodian") of the Fund's Assets pursuant to a Custodian Agreement dated June
1, 1993 (the "Custodian Agreement");
WHEREAS the Fund may, from time to time, determine to invest and
maintain some or all of the Fund's Assets outside the United States;
WHEREAS the Board of Directors/Trustees of the Fund (the "Board")
wishes to delegate to the Delegate certain functions with respect to the custody
of Fund's Assets outside the United States;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Fund and the Delegate agree as follows.
Capitalized terms shall have the meaning indicated in Section 12 unless
otherwise indicated.
1. Maintenance of Fund's Assets Abroad. The Fund, acting through
its Board or its duly authorized representative, hereby instructs Delegate
pursuant to the terms of the Custodian Agreement to place and maintain the
Fund's Assets within the countries listed in Schedule 1 attached hereto (as such
Schedule may be amended from time to time in accordance herewith). Such
instruction shall be deemed to include an instruction to use any Compulsory
Securities Depository in any such country and shall represent a Proper
Instruction under the terms of the Custodian Agreement. Countries may be added
to Schedule 1 by written instruction of the Fund that is accepted in writing by
the Delegate as an amendment to Schedule 1. With respect to amendments adding
countries to Schedule 1, the Fund acknowledges that - (a) the Delegate shall
perform services hereunder only with respect to the countries where it provides
custodial services to the Fund under the Custodian Agreement; (b) depending on
conditions in the particular country, advance notice may be required before the
Delegate shall be able to perform its duties hereunder in or with respect to
such country (such advance notice to be reasonable in light of the specific
facts and circumstances attendant to performance of duties in such country); and
(c) nothing in this Agreement shall require the Delegate to provide delegated or
custodial services in any country not listed in Schedule 1 until such amended
Schedule 1 has been accepted by the Delegate in accordance herewith.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the
Act as amended, the Board hereby delegates to the Delegate, and the Delegate
hereby accepts such delegation and agrees to perform, only those duties set
forth in this Agreement concerning the safekeeping of the Fund's Assets in each
of the countries set forth in Schedule 1 hereto, as amended from time to time.
The Delegate is hereby authorized to take such actions on behalf of or in the
name of the Fund as are reasonably required to discharge its duties under this
Agreement, including, without limitation, to cause the Fund's Assets to be
placed with a particular Eligible Foreign Custodian in accordance herewith. The
Fund confirms to the Delegate that the Fund or its investment adviser has
considered the Sovereign Risk and prevailing country risk as part of its
continuing investment decision process, including such factors as may be
reasonably related to the systemic risk of maintaining the Fund's Assets in a
particular country, including, but not limited to, financial infrastructure,
prevailing custody and settlement systems and practices (including the use of
any Compulsory Securities Depository), and the laws relating to the safekeeping
and recovery of the Fund's Assets held in custody pursuant to the terms of the
Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract
Administration. The Delegate shall perform the following duties with respect to
the selection of Eligible Foreign Custodians and administration of certain
contracts governing the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall
place and maintain the Fund's Assets with an Eligible Foreign Custodian;
provided that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians in
the relevant market after considering all factors relevant to the safekeeping of
such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository, the
method of keeping custodial records, and the security and data
protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets,
including but not limited to the adequacy of the Eligible Foreign
Custodian's capital with regard to protecting the Fund's assets against
the risk of loss due to such Custodian's insolvency;
(iii) The Eligible Foreign Custodian's general reputation and
standing and, in the case of a Securities Depository, the depository's
operating history and number of participants; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. In the case of an Eligible Foreign
Custodian that is not a Securities Depository or a U.S. Bank, the Delegate shall
cause that the foreign custody arrangements shall be governed by a written
contract that the Delegate has determined will provide reasonable care for Fund
assets based on the standards applicable to custodians in the relevant market.
Each such contract shall, except as set forth in the last paragraph of this
subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately
protected against the risk of loss of assets held in accordance with
such contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment
for their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of such Custodian
arising under bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than
for safe custody or administration;
(iv) That adequate records will be maintained identifying the
Fund's Assets as belonging to the Fund or as being held by a third
party for the benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) above or confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely periodic
reports with respect to the safekeeping of the Fund's Assets,
including, but not limited to, notification of any transfer to or from
the Fund's account or a third party account containing the Fund's
Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3 (b), such other provisions that the
Delegate determines will provide, in their entirety, the same or a
greater level of care and protection for the Fund's Assets as the
specified provisions, in their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in this
Agreement to the contrary, the duties under this Section 3 shall apply only to
Eligible Foreign Custodians selected by the Delegate and shall not apply to
Compulsory Securities Depositories or to any Eligible Foreign Custodian that the
Delegate is directed to use pursuant to Section 7. The parties agree to amend or
supplement this Agreement due to subsequent amendments to or clarifications by
the Securities and Exchange Commission of Rule 17f-5 under the Act as it relates
to Compulsory Securities Depositories or the duties of a delegate under such
Rule. The parties further agree that the Delegate shall provide the Fund with
the opportunity to amend or supplement this Agreement in the same manner as and
promptly after any other registered investment company or series thereof for
which the Delegate serves as a delegate under Rule 17f-5 has agreed with the
Delegate to amend the terms of or supplement its delegation agreement under Rule
17f-5 as it relates to Compulsory Securities Depositories or the duties of the
Delegate under such agreement.
4. Monitoring. The Delegate shall establish a system to monitor at
reasonable intervals (but at least annually) the appropriateness of maintaining
the Fund's Assets with each Eligible Foreign Custodian that has been selected by
the Delegate pursuant to Section 3 of this Agreement. The Delegate shall monitor
the continuing appropriateness of placement of the Fund's Assets in accordance
with the criteria established under Section 3(a) of this Agreement. The Delegate
shall monitor the continuing appropriateness of the contract governing the
Fund's arrangements in accordance with the criteria established under Section
3(b) of this Agreement.
5. Reporting. At least annually and more frequently as mutually
agreed by the parties, the Delegate shall provide to the Board written reports
specifying placement of the Fund's Assets with each Eligible Foreign Custodian
selected by the Delegate pursuant to Section 3 of this Agreement and shall
promptly report as to any material changes to such foreign custody arrangements.
Delegate will prepare such a report with respect to any Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7
only to the extent specifically agreed with respect to the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an
arrangement with a specific Eligible Foreign Custodian selected by the Delegate
under Section 3 of this Agreement no longer meets the requirements of said
Section, Delegate shall promptly notify the Fund of such fact and shall withdraw
the Fund's Assets from the non-complying arrangement as soon as reasonably
practicable; provided, however, that if in the reasonable judgment of the
Delegate, such withdrawal would require liquidation of any of the Fund's Assets
or would materially impair the liquidity, value or other investment
characteristics of the Fund's Assets, it shall be the duty of the Delegate to
provide information regarding the particular circumstances and to act only in
accordance with Proper Instructions of the Fund or its Investment Adviser with
respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding
this Delegation Agreement, the Fund, acting through its Board, its Investment
Adviser or its other authorized representative, may direct the Delegate to place
and maintain the Fund's Assets with a particular Eligible Foreign Custodian. In
such event, the Delegate shall be entitled to rely on any such instruction as a
Proper Instruction under the terms of the Custodian Agreement and shall have no
duties under this Delegation Agreement with respect to such arrangement save
those that it may undertake as mutually agreed upon by the Fund and the
Delegate. Such additional duties shall be memorialized in writing with respect
to each particular instance, and may include monitoring and reports with respect
to these Custodians.
8. Standard of Care. In carrying out its duties under this
Agreement, the Delegate agrees to exercise reasonable care, prudence and
diligence such as a person having responsibility for safekeeping the Fund's
Assets would exercise.
9. Representations. The Delegate hereby represents and warrants
that it is a U.S. Bank and that this Agreement has been duly authorized,
executed and delivered by the Delegate and is a legal, valid and binding
agreement of the Delegate.
The Fund hereby represents and warrants that its Board of
Directors has determined that it is reasonable to rely on the Delegate to
perform the delegated responsibilities provided for herein and that this
Agreement has been duly authorized, executed and delivered by the Fund and is a
legal, valid and binding agreement of the Fund.
10. Effectiveness; termination. This Agreement shall be effective
as of the date on which this Agreement shall have been accepted by the Delegate,
as indicated by the date set forth below the Delegate's signature. This
Agreement may be terminated at any time, without penalty, by written notice from
the terminating party to the non-terminating party. Such termination shall be
effective on the 30th day following the date on which the non-terminating party
shall receive the foregoing notice. The foregoing to the contrary
notwithstanding, this Agreement shall be deemed to have been terminated
concurrently with the termination of the Custodian Agreement.
11. Notices. Notices and other communications under this Agreement
are to be made in accordance with the arrangements designated for such purpose
under the Custodian Agreement unless otherwise indicated in a writing
referencing this Agreement and executed by both parties.
12. Definitions. Capitalized terms in this agreement have the
following meanings:
a. Compulsory Securities Depository - shall mean a Securities
Depository the use of which is mandatory (i) under applicable law
or regulation; (ii) because securities cannot be withdrawn from
the depository; or, (iii) because maintaining securities outside
the Securities Depository is not consistent with prevailing
custodial practices.
b. Eligible Foreign Custodian - shall have the meaning set forth
in Rule 17f-5(a)(1) and shall also include a U.S. Bank.
c. Fund's Assets - shall mean any of the Fund's investments
(including foreign currencies) for which the primary market is
outside the United States, and such cash and cash equivalents as
are reasonably necessary to effect the Fund's transactions in such
investments.
d. Proper Instructions - shall have the meaning set forth in the
Custodian Agreement.
e. Securities Depository - shall have the meaning set forth in
Rule 17f-5(a)(6).
f. Sovereign Risk - shall have the meaning set forth in Section
[6.3] of the Custodian Agreement.
g. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of
the Act.
13. Governing Law and Jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of New York. The parties
hereby submit to the exclusive jurisdiction of the Federal courts sitting in the
State of New York or the Commonwealth of Massachusetts or of the state courts of
either such State or such Commonwealth.
It is understood and expressly stipulated that none of the trustees, officers,
agents or shareholders of the Fund shall be personally liable hereunder. It is
understood and acknowledged that all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund, as neither the trustees, officers, agents nor shareholders assume any
personal liability for obligations entered into on behalf of the Fund.
14. Fees. Delegate shall perform its functions under this
agreement for the compensation determined under the Custodian Agreement.
15. Integration. This Agreement sets forth all of the Delegate's
duties with respect to the selection and monitoring of Eligible Foreign
Custodians, the administration of contracts with Eligible Foreign Custodians,
the withdrawal of assets from Eligible Foreign Custodians and the issuance of
reports in connection with such duties. The terms of the Custodian Agreement
shall apply generally as to matters not expressly covered in this Agreement,
including dealings with the Eligible Foreign Custodians in the course of
discharge of the Delegate's obligations under the Custodian Agreement.
<PAGE>
NOW THEREFORE, the parties have caused this Agreement to be executed by its duly
authorized representatives, effective as of the date first above written.
BROWN BROTHERS HARRIMAN & CO. IVY FUND
By: DOUGLAS A. DONAHUE, JR. By: C. WILLIAM FERRIS
Name: Douglas A. Donahue, Jr. Name: C. William Ferris
Title: Partner__________________ Title: Secretary/Treasurer
Date: 9/16/98____________________ Date: 9/14/98
EXHIBIT h(49)
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"), the
duties of IMI thereunder of which were assigned on October 1, 1993 to Ivy
Mackenzie Services Corp. ("IMSC")(formerly "Mackenzie Ivy Investor Services
Corp."), 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 China Region Fund 20.00 N/A 20.00
Ivy Developing Nations Fund 20.00 N/A 20.00
Ivy European Opportunities Fund 20.00 10.25 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 International Fund 20.00 10.25 N/A
Ivy International Fund II 20.00 10.25 20.00
Ivy International Small Companies Fund 20.00 10.25 20.00
Ivy International Strategic Bond Fund 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 Blue Chip Fund 20.00 10.25 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 International Strategic Bond Fund, filed with the
Securities and Exchange Commission 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 as of the 30th day of April, 1999.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MACKENZIE SERVICES CORP.
By: C. WILLIAM FERRIS
C. William Ferris, President
EXHIBIT h(50)
IVY FUND
FUND ACCOUNTING SERVICES AGREEMENT SUPPLEMENT
Ivy International Strategic Bond Fund
AGREEMENT made as of the 30th day of April, 1999, by and between Ivy
Fund (the "Trust") and Mackenzie Investment Management Inc. (the "Agent").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Fund Accounting Services
Agreement dated January 25, 1993 (the "Master Agreement"), pursuant to which the
Trust has appointed the Agent to provide the fund accounting services specified
in the Master Agreement; and
WHEREAS, Ivy International Strategic Bond Fund (the "Fund") is a
separate investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts the
Master Agreement with respect to the Fund, and the Manager hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, the Fund shall pay the Agent a monthly fee
based upon the rate(s) set forth in the Fee Schedule attached hereto as Annex 1.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund as of the date specified above,
and unless sooner terminated as hereinafter provided, the Agreement shall remain
in effect with respect to the Fund for a period of more than one (1) year from
such date only so long as the continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the vote or written consent
of a majority of the Trust's Independent Trustees (as defined in the Investment
Company Act of 1940, as amended). This Agreement may be terminated with respect
to the Fund, without payment of any penalty, by the Fund upon at least ninety
(90) days' prior written notice to the Agent or by the Agent upon at least
ninety (90) days' prior written notice to the Fund; provided, that in the case
of termination by the Fund, such action shall have been authorized by the
Trust's Board of Trustees, including the vote or written consent of a majority
of the Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
<PAGE>
ANNEX 1
FUND ACCOUNTING SERVICES AGREEMENT
FEE SCHEDULE
Based upon assets under management (in millions):
$0-$10 > $10-$40 >$40-$75 Over $75
Ivy International Strategic
Bond Fund $1,250 $2,500 $5,000 $6,500
EXHIBIT h(51)
IVY FUND
ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT
Ivy International Strategic Bond Fund
AGREEMENT made as of the 30th day of April, 1999 by and between Ivy Fund
(the "Trust") and Mackenzie Investment Management Inc. ("MIMI").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate series of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Administrative Services
Agreement dated September 1, 1992 (the "Master Services Agreement"), pursuant to
which the Trust has appointed MIMI to provide the administrative services
specified in the Master Services Agreement; and
WHEREAS, Ivy International Strategic Bond Fund (the "Fund") is a
separate investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Services Agreement, the Trust hereby
adopts the Master Services Agreement with respect to the Fund, and MIMI hereby
acknowledges that the Master Services Agreement shall pertain to the Fund, the
terms and conditions of such Master Services Agreement being incorporated herein
by reference.
2. The term "Fund" as used in the Master Services Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Services Agreement and subject to further
conditions as set forth therein, the Fund shall pay MIMI a monthly fee on the
first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in the Fund's Prospectus
for determining net asset value per share) of the net assets of the Fund during
the preceding month at the annual rate of (i) 0.10% with respect to the Fund's
Class A, Class B, Class C and Advisor Class shares, and (ii) 0.01% with respect
to the Fund's Class I shares.
4. This Supplement and the Master Services Agreement (together, the
"Agreement") shall become effective with respect to the Fund as of the date
specified above, and unless sooner terminated as hereinafter provided, the
Agreement shall remain in effect for a period of two years from that date.
Thereafter, the Agreement shall continue in effect with respect to the Fund from
year to year, provided such continuance with respect to the Fund is approved at
least annually by the Trust's Board of Trustees, including the vote or written
consent of a majority of the Trust's Independent Trustees (as defined in the
Investment Company Act of 1940, as amended). This Agreement may be terminated
with respect to the Fund at any time, without payment of any penalty, by MIMI
upon at least sixty (60) days' prior written notice to the Fund, or by the Fund
upon at least sixty (60) days' written notice to MIMI; provided, that in case of
termination by the Fund, such action shall have been authorized by the Trust's
Board of Trustees, including the vote or written consent of a majority of the
Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
EXHIBIT h(52)
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"), the
duties of IMI thereunder of which were assigned on October 1, 1993 to Ivy
Mackenzie Services Corp. ("IMSC")(formerly "Mackenzie Ivy Investor Services
Corp."), 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 China Region Fund 20.00 N/A 20.00
Ivy Developing Nations Fund 20.00 N/A 20.00
Ivy European Opportunities Fund 20.00 10.25 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 International Fund 20.00 10.25 N/A
Ivy International Fund II 20.00 10.25 20.00
Ivy International Small Companies Fund 20.00 10.25 20.00
Ivy International Strategic Bond Fund 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 Blue Chip Fund 20.00 10.25 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 European Opportunities Fund, filed with the
Securities and Exchange Commission 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 as of the 30th day of April, 1999.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
IVY MACKENZIE SERVICES CORP.
By: C. WILLIAM FERRIS
C. William Ferris, President
EXHIBIT h(53)
IVY FUND
FUND ACCOUNTING SERVICES AGREEMENT SUPPLEMENT
Ivy European Opportunities Fund
AGREEMENT made as of the 30th day of April, 1999, by and between Ivy
Fund (the "Trust") and Mackenzie Investment Management Inc. (the "Agent").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Fund Accounting Services
Agreement dated January 25, 1993 (the "Master Agreement"), pursuant to which the
Trust has appointed the Agent to provide the fund accounting services specified
in the Master Agreement; and
WHEREAS, Ivy European Opportunities Fund (the "Fund") is a separate
investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts the
Master Agreement with respect to the Fund, and the Manager hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, the Fund shall pay the Agent a monthly fee
based upon the rate(s) set forth in the Fee Schedule attached hereto as Annex 1.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund as of the date specified above,
and unless sooner terminated as hereinafter provided, the Agreement shall remain
in effect with respect to the Fund for a period of more than one (1) year from
such date only so long as the continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the vote or written consent
of a majority of the Trust's Independent Trustees (as defined in the Investment
Company Act of 1940, as amended). This Agreement may be terminated with respect
to the Fund, without payment of any penalty, by the Fund upon at least ninety
(90) days' prior written notice to the Agent or by the Agent upon at least
ninety (90) days' prior written notice to the Fund; provided, that in the case
of termination by the Fund, such action shall have been authorized by the
Trust's Board of Trustees, including the vote or written consent of a majority
of the Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
<PAGE>
ANNEX 1
FUND ACCOUNTING SERVICES AGREEMENT
FEE SCHEDULE
Based upon assets under management (in millions):
$0-$10 > $10-$40 >$40-$75 Over $75
Ivy European Opportunities
Fund $1,250 $2,500 $5,000 $6,500
EXHIBIT h(54)
IVY FUND
ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT
Ivy European Opportunities Fund
AGREEMENT made as of the 30th day of April, 1999 by and between Ivy
Fund (the "Trust") and Mackenzie Investment Management Inc. ("MIMI").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate series of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Administrative Services
Agreement dated September 1, 1992 (the "Master Services Agreement"), pursuant to
which the Trust has appointed MIMI to provide the administrative services
specified in the Master Services Agreement; and
WHEREAS, Ivy European Opportunities Fund (the "Fund") is a separate
investment portfolio of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Services Agreement, the Trust hereby
adopts the Master Services Agreement with respect to the Fund, and MIMI hereby
acknowledges that the Master Services Agreement shall pertain to the Fund, the
terms and conditions of such Master Services Agreement being incorporated herein
by reference.
2. The term "Fund" as used in the Master Services Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Services Agreement and subject to further
conditions as set forth therein, the Fund shall pay MIMI a monthly fee on the
first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in the Fund's Prospectus
for determining net asset value per share) of the net assets of the Fund during
the preceding month at the annual rate of (i) 0.10% with respect to the Fund's
Class A, Class B, Class C and Advisor Class shares, and (ii) 0.01% with respect
to the Fund's Class I shares.
4. This Supplement and the Master Services Agreement (together, the
"Agreement") shall become effective with respect to the Fund as of the date
specified above, and unless sooner terminated as hereinafter provided, the
Agreement shall remain in effect for a period of two years from that date.
Thereafter, the Agreement shall continue in effect with respect to the Fund from
year to year, provided such continuance with respect to the Fund is approved at
least annually by the Trust's Board of Trustees, including the vote or written
consent of a majority of the Trust's Independent Trustees (as defined in the
Investment Company Act of 1940, as amended). This Agreement may be terminated
with respect to the Fund at any time, without payment of any penalty, by MIMI
upon at least sixty (60) days' prior written notice to the Fund, or by the Fund
upon at least sixty (60) days' written notice to MIMI; provided, that in case of
termination by the Fund, such action shall have been authorized by the Trust's
Board of Trustees, including the vote or written consent of a majority of the
Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy International Strategic Bond Fund
By: KEITH J. CARLSON
Keith J. Carlson, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: MICHAEL G. LANDRY
Michael G. Landry, President
EXHIBIT m(34)
SUPPLEMENT TO
MASTER AMENDED AND RESTATED DISTRIBUTION PLAN
FOR IVY FUND CLASS A SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
December 21, 1991 and amended and restated on October 23, 1993 (the "Plan"), in
accordance with the requirements of the 1940 Act, and determined that there is a
reasonable likelihood that the Plan will benefit Ivy Fund and its shareholders;
and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class A
Shares of a new Portfolio of Ivy Fund referred to as Ivy International Strategic
Bond Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class A shares of Ivy International Strategic Bond
Fund, Ivy Fund hereby adopts this Supplement, to be effective as of the date
that the Registration Statement pertaining to Ivy International Strategic Bond
Fund was filed with the Securities and Exchange Commission pursuant to Rule
485(a)(1) under the Securities Act of 1933.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
EXHIBIT m(35)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS B SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
October 23, 1993 (the "Plan"), in accordance with the requirements of the 1940
Act, and determined that there is a reasonable likelihood that the Plan will
benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class B
Shares of a new Portfolio of Ivy Fund referred to as Ivy International Strategic
Bond Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class B shares of Ivy International Strategic Bond
Fund, Ivy Fund hereby adopts this Supplement, to be effective as of the date
that the Registration Statement pertaining to Ivy International Strategic Bond
Fund was filed with the Securities and Exchange Commission pursuant to Rule
485(a)(1) under the Securities Act of 1933.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
EXHIBIT m(36)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS C SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
February 10, 1996 (the "Plan"), in accordance with the requirements of the 1940
Act, and determined that there is a reasonable likelihood that the Plan will
benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class C
Shares of a new Portfolio of Ivy Fund referred to as Ivy International Strategic
Bond Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class C shares of Ivy International Strategic Bond
Fund, Ivy Fund hereby adopts this Supplement, to be effective as of the date
that the Registration Statement pertaining to Ivy International Strategic Bond
Fund was filed with the Securities and Exchange Commission pursuant to Rule
485(a)(1) under the Securities Act of 1933.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
EXHIBIT m(37)
SUPPLEMENT TO
MASTER AMENDED AND RESTATED DISTRIBUTION PLAN
FOR IVY FUND CLASS A SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
December 21, 1991 and amended and restated on October 23, 1993 (the "Plan"), in
accordance with the requirements of the 1940 Act, and determined that there is a
reasonable likelihood that the Plan will benefit Ivy Fund and its shareholders;
and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class A
Shares of a new Portfolio of Ivy Fund referred to as Ivy European Opportunities
Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class A shares of Ivy European Opportunities Fund,
Ivy Fund hereby adopts this Supplement, to be effective as of the date that the
Registration Statement pertaining to Ivy European Opportunities Fund was filed
with the Securities and Exchange Commission pursuant to Rule 485(a)(2) under the
Securities Act of 1933.
.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
EXHIBIT m(38)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS B SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
October 23, 1993 (the "Plan"), in accordance with the requirements of the 1940
Act, and determined that there is a reasonable likelihood that the Plan will
benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class B
Shares of a new Portfolio of Ivy Fund referred to as Ivy US European
Opportunities Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class B shares of Ivy US European Opportunities
Fund, Ivy Fund hereby adopts this Supplement, to be effective as of the date
that the Registration Statement pertaining to Ivy European Opportunities Fund
was filed with the Securities and Exchange Commission pursuant to Rule 485(a)(2)
under the Securities Act of 1933.
IVY FUND
By: KEITH J. CARLSON_____________
Keith J. Carlson, President
EXHIBIT m(39)
SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS C SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
February 10, 1996 (the "Plan"), in accordance with the requirements of the 1940
Act, and determined that there is a reasonable likelihood that the Plan will
benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class C
Shares of a new Portfolio of Ivy Fund referred to as Ivy US European
Opportunities Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class C shares of Ivy US European Opportunities
Fund, Ivy Fund hereby adopts this Supplement, to be effective as of the date
that the Registration Statement pertaining to Ivy European Opportunities Fund
was filed with the Securities and Exchange Commission pursuant to Rule 485(a)(2)
under the Securities Act of 1933.
IVY FUND
By: KEITH J. CARLSON
Keith J. Carlson, President
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MASSACHUSETTS 02109-4603
May 3, 1999
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. 110 to the Trust's registration statement relating
to the shares of beneficial interest of Ivy Asia Pacific Fund, Ivy Bond Fund,
Ivy China Region Fund, Ivy Developing Nations Fund, Ivy European Opportunities
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
International Strategic Bond Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund,
Ivy South America Fund, Ivy US Blue Chip 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. 110"). 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. 110.
Very truly yours,
/s/DECHERT PRICE & RHOADS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the incorporation by reference and inclusion in
Post-Effective Amendment No. 110 to the Registration Statement on Form N-1A
(File No. 2-17613, hereafter the "Registration Statement") of Ivy Fund of our
reports dated February 12, 1999, on our audits of the financial statements and
financial highlights of Ivy International Fund, Ivy Growth Fund, Ivy Bond Fund,
Ivy Growth w/Income Fund, Ivy Money Market Fund, Ivy US Emerging Growth Fund,
Ivy Global Fund, Ivy China Region Fund, Ivy Developing Nations Fund, Ivy South
America Fund, Ivy Global Science and Technology Fund, Ivy International Small
Companies Fund, Ivy Global Natural Resources Fund, Ivy Asia Pacific Fund, Ivy
International Fund II, Ivy Pan-Europe Fund, and Ivy US Blue Chip Fund appearing
in the December 31, 1998 Annual Reports to Shareholders of the Funds, which
annual reports are incorporated by reference in Post-Effective Amendment No. 110
to the Registration Statement. We also consent to the reference to our Firm
under the caption "Financial Highlights" in the Prospectuses and "Auditors" in
the Fund's Statements of Additional Information.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
April 30, 1999
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the inclusion in Item 22 to Part B of Post-Effective
Amendment No. 110 to the Registration Statement on Form N-1A (File No. 2-17613,
hereafter the "Registration Statement") of Ivy Fund of our reports dated April
28, 1999 on our audits of the Statements of Assets and Liabilities as of April
28, 1999 of Ivy International Strategic Bond Fund and Ivy European Opportunities
Fund appearing in the Registration Statement. We also consent to the reference
to our Firm under the caption "Auditors" in the Fund's Statements of Additional
Information.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
April 30, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/S/ /S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy International Fund II (the
"Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for the year then ended and for the period May 13, 1997 (commencement of
operations) through December 31, 1997, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Growth with Income Fund (the
"Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy China Region Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy US Emerging Growth Fund (the
"Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Bond Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Developing Nations Fund (the
"Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy US Blue Chip Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, and
the results of its operations and the changes in its net assets for the period
November 2, 1998 (commencement of operations) through December 31, 1998, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Pan Europe Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for the year then ended and for the period May 13, 1997 (commencement of
operations) through December 31, 1997, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Asia Pacific Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy International Small Companies
Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Global Natural Resources Fund
(the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Global Science and Technology
Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Money Market Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy South America Fund (the
"Fund"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1998, 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 presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of
Ivy International Strategic Bond Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities of the Fund
presents fairly, in all material respects, the financial position of the Fund at
April 28, 1999, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale,
Florida
April 30, 1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of
Ivy European Opportunities Fund (the "Fund"):
In our opinion, the accompanying statement of assets and liabilities of the Fund
presents fairly, in all material respects, the financial position of the Fund at
April 28, 1999, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale,
Florida
April 30, 1999
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<OVERDISTRIBUTION-GAINS> 0
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<DISTRIBUTIONS-OF-INCOME> 3953
<DISTRIBUTIONS-OF-GAINS> 104113
<DISTRIBUTIONS-OTHER> 400
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<SHARES-COMMON-PRIOR> 22918
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<OVERDISTRIBUTION-GAINS> 0
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IVY FUND
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on February 6, 1999)
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 European Opportunities 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 International
Strategic Bond Fund, 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, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund. Ivy
Bond Fund, Ivy European Opportunities Fund, Ivy Global Science & Technology
Fund, Ivy High Yield Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy International Strategic Bond Fund
and Ivy US Blue Chip 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.
<PAGE>
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 European Opportunities 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 International
Strategic Bond 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 Blue Chip Fund 0.25% 0.00% 1.00%
Ivy US Emerging Growth
Fund 0.25% 0.00% 1.00%
* See footnote 1.
<PAGE>
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.
<PAGE>
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 on
February 7, 1998 to reflect the redesignation of Ivy International Bond Fund as
Ivy High Yield Fund. The Plan was further amended and restated on September 19,
1998 to reflect the redesignation of Ivy US Blue Chip Fund. The Plan was further
amended and restated as of the date set forth on the first page hereof to
reflect the establishment and designation of Ivy European Opportunities Fund and
Ivy International Strategic Bond 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.
