As filed electronically with the Securities and Exchange Commission on
May 1, 2000 (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. 115 [ 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
May 1, 2000, pursuant to paragraph (b)(1) of Rule 485.
<PAGE>
THIS POST-EFFECTIVE AMENDMENT NO. 115 IS BEING FILED IN ORDER TO PROVIDE UPDATED
FINANCIAL INFORMATION FOR THE FOLLOWING NINETEEN SERIES OFFERED BY THE
REGISTRANT: IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY DEVELOPING MARKETS
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 PAN-EUROPE FUND AND IVY SOUTH
AMERICA FUND (THE "INTERNATIONAL EQUITY FUNDS"); IVY GROWTH FUND, IVY GROWTH
WITH INCOME FUND, IVY US BLUE CHIP FUND AND IVY US EMERGING GROWTH FUND (THE "US
EQUITY FUNDS"); IVY BOND FUND, IVY INTERNATIONAL STRATEGIC BOND FUND AND IVY
MONEY MARKET FUND (THE "FIXED INCOME FUNDS"); AND IVY INTERNATIONAL FUND. THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION THAT ARE INCLUDED IN THIS
POST-EFFECTIVE AMENDMENT NO. 115 ARE TO BE USED CONCURRENTLY WITH AND SEPARATELY
FROM THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION RELATING TO THE
OTHER TWO SERIES OF THE REGISTRANT, WHICH ARE NOT INCLUDED HEREWITH BUT ARE
INCORPORATED BY REFERENCE TO THIS FILING.
<PAGE>
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 115 contains the Prospectuses and
Statements of Additional Information ("SAIs") to be used with the following
nineteen series of Ivy Fund (the "Funds"): (1) Ivy Asia Pacific Fund, Ivy China
Region Fund, Ivy Developing Markets 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
Pan-Europe Fund and Ivy South America Fund (the "International Equity Funds");
(2) Ivy Growth Fund, Ivy Growth with Income Fund, Ivy US Blue Chip Fund and Ivy
US Emerging Growth Fund (the "US Equity Funds"); (3) Ivy Bond Fund, Ivy
International Strategic Bond Fund and Ivy Money Market Fund (the "Fixed Income
Funds"); and (4) Ivy International Fund. The Prospectuses and SAIs for the Funds
appear in the following order:
------------------------------------------- ----------------------------------
FUND GROUPING: DOCUMENT DESCRIPTION:
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
International Equity Funds Prospectus, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
International Equity Funds Prospectus, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
US Equity Funds Prospectus, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
US Equity Funds Prospectus, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Fixed Income Funds Prospectus, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Fixed Income Funds* Prospectus, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Ivy International Fund* Prospectus, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
International Equity Funds SAI, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
International Equity Funds SAI, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
US Equity Funds SAI, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
US Equity Funds SAI, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Fixed Income Funds SAI, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Fixed Income Funds* SAI, Advisor Class Shares
------------------------------------------- ----------------------------------
------------------------------------------- ----------------------------------
Ivy International Fund* SAI, Class A/B/C/I Shares
------------------------------------------- ----------------------------------
* Ivy International Fund and Ivy Money Market Fund do not offer Advisor Class
Shares.
ITEMS REQUIRED BY FORM N-1A:
PART A: PROSPECTUS
ITEM 1 FRONT AND BACK COVER PAGES: Front and back cover pages
ITEM 2 RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE: Fund-
specific sections following front cover page
ITEM 3 RISK/RETURN SUMMARY: FEE TABLE: Fund-specific sections
following front cover page
ITEM 4 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND
RELATED RISKS: Fund-specific sections
following front cover page; 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: Financial Highlights
PART B: STATEMENT OF ADDITIONAL INFORMATION
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 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 1, 2000 INTERNATIONAL EQUITY FUND
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING MARKETS 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 PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
Ivy Fund is a registered open-end investment company consisting
of twenty-one separate portfolios. This Prospectus relates to
the Class A, Class B and Class C shares of the eleven 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 Asia Pacific Fund
4 Ivy China Region Fund
6 Ivy Developing Markets Fund
8 Ivy European Opportunities Fund
10 Ivy Global Fund
12 Ivy Global Natural Resources Fund
14 Ivy Global Science & Technology Fund
16 Ivy International Fund II
18 Ivy International Small Companies Fund
20 Ivy Pan-Europe Fund
22 Ivy South America Fund
25 Additional information
about investment strategies
and risks
31 Management
32 Shareholder information
39 Financial highlights
57 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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 (including
common stock, preferred stock and securities convertible into common stock)
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.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q4 '98: 43.90%
Worst quarter Q2 '98: (34.21%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI FAR
EAST FREE
(EX-JAPAN)
CLASS A CLASS B CLASS C INDEX
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year..................... 36.76% 38.64% 42.92% 59.40%
Since inception(2)............ (8.38%) (8.21%) (8.45%) (6.98%)
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The inception date for all Classes was January 1, 1997. Index
performance is calculated from December 31, 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>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends................... none none none
Redemption fee(2)........... 2.00% 2.00% 2.00%
Exchange fee................ none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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.............. 2.60% 2.63% 2.55%
Total annual Fund
operating expenses.......... 3.85% 4.63% 4.55%
Expenses reimbursed(3)...... 1.64% 1.64% 1.64%
Net Fund
operating expenses(3)....... 2.21% 2.99% 2.91%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption
fee. This fee also applies to Class A shares purchased without a
sales charge.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 786 $ 802 $ 302 $ 394 $ 294
3rd 1,333 1,335 1,035 1,011 1,011
5th 1,905 1,989 1,789 1,751 1,751
10th 3,449 3,600 3,600 3,702 3,702
</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 (including
common stock, preferred stock and securities convertible into common stock) of
companies that are located or have a substantial business presence in the China
region, focusing on China, Hong Kong, Taiwan and South Korea.
For these purposes, a company with a "substantial business presence" in the
China region is one that:
- - is organized in (or whose securities are principally traded in) the China
region,
- - has at least 35% of its assets in one or more China region countries,
- - derives at least 35% of its gross sales revenues or profits from providing
goods or services to or from one or more China region countries, or
- - has significant manufacturing or other operations in one or more China region
countries.
The Fund may also invest in equity securities of companies whose current or
expected performance, based on factors such as growth trends in the geographic
location of the companies' assets and the sources of their revenues and profits,
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. Some of the Fund's
investments may produce income (such as dividends), although it is expected that
any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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-based
index and other indexes that reflect the market sectors in which the Fund
invests. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q2 '99: 40.73%
Worst quarter Q4 '97: (30.21%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIPPER
CLASS HANG MSCI IFC CHINA
--------------------------- SENG TAIWAN CHINA REGION
A B C INDEX INDEX INDEX CATEGORY
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Past year............ 38.28% 40.33% 44.41% 68.80% 52.71% 105.25% 62.35%
Past 5 years......... 0.97% 1.02% n/a 15.67% 2.41% (4.25%) 3.20%
Since inception:(2)
Class A & B(3)....... (1.48%) (1.29%) -- 10.14%(4) 13.34%(4) n/a (0.23%)(4)
Class C(5)........... -- -- (0.71%) 12.62% 6.92% (0.33%) 2.68%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) Unless otherwise noted, Index performance is calculated by reference to
each class's inception date.
(3) The inception date for the Fund's Class A and Class B shares was
October 22, 1993.
(4) Lipper China Region Category is calculated from October 28, 1993. Hang
Seng Index and MSCI Taiwan Index are calculated from October 31, 1993.
(5) 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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested
dividends............ none none none
Redemption fee(2).... 2.00% 2.00% 2.00%
Exchange fee......... none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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......... 1.59% 1.62% 1.68%
Total annual Fund
operating expenses..... 2.84% 3.62% 3.68%
Expenses
reimbursed(3).......... 0.65% 0.65% 0.65%
Net Fund
operating
expenses(3)............ 2.19% 2.97% 3.03%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption fee.
This fee also applies to Class A shares purchased without a sales
charge.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 406 $ 306
3rd 1,327 1,329 1,029 1,046 1,046
5th 1,895 1,980 1,780 1,808 1,808
10th 3,431 3,582 3,582 3,809 3,809
</TABLE>
5
<PAGE> 6
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
- --------------------------------------------------------------------------------
- -------------------------------
IVY DEVELOPING
MARKETS 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 (including
common stock, preferred stock and securities convertible into common stock) of
companies that are located in, or are expected to profit from, countries whose
markets are generally viewed as "developing" or "emerging" by the World Bank
and the International Finance Corporation, or classified as "emerging" by the
United Nations.
For these purposes, a company "located in" or "expected to profit" from emerging
market countries is one:
- - whose securities are principally trading in one or more emerging market
countries,
- - that derives at least 50% of its total revenue from goods, sales or services
in one or more emerging market countries, or
- - that is organized under the laws of (and has a principal office in) an
emerging market country.
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. Some of the Fund's
investments may produce income (such as dividends), although it is expected that
any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q2 '99: 35.74%
Worst quarter Q4 '97: (27.28%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
CLASS EMERGING
--------------------------- MARKETS
A B C FREE INDEX
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year................................. 38.27% 40.82% 44.84% 66.41%
Past 5 years.............................. 1.07% 1.16% n/a 2.00%
Since inception:
Class A & B(2)............................ (1.76%) (1.53%) -- (0.73%)
Class C(3)................................ -- -- (1.72%) 1.45%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2) The inception date for the Fund's Class A and Class B shares was
November 1, 1994.
(3) 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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge (load)
imposed on reinvested
dividends...................... none none none
Redemption fee(2).............. 2.00% 2.00% 2.00%
Exchange fee................... none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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............ 2.03% 1.90% 1.83%
Total annual Fund
operating expenses........ 3.28% 3.90% 3.83%
Expenses reimbursed(3).... 0.98% 0.98% 0.98%
Net Fund
operating expenses(3)..... 2.30% 2.92% 2.85%
</TABLE>
(1)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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption
fee. This fee also applies to Class A shares purchased without a
sales charge.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 795 $ 795 $ 295 $ 388 $ 288
3rd 1,358 1,314 1,014 994 994
5th 1,947 1,956 1,756 1,722 1,722
10th 3,531 3,572 3,572 3,648 3,648
</TABLE>
7
<PAGE> 8
[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 (including common stock, preferred stock and securities convertible
into common stock) of European companies, which may include:
- - large European companies, or European companies of any size that provide
special investment opportunities (such as privatized companies, those
providing exceptional value, or those engaged in initial public offerings);
- - small-capitalization companies in the more developed markets of Europe; and
- - companies operating in Europe's emerging markets.
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). These
securities typically are rated Ba or below by Moody's or BB or below by S&P (or
are judged by the Fund's manager to be of comparable quality).
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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
INTEREST RATE AND MATURITY RISK: The Fund's debt security investments are
susceptible to decline in a rising interest rate environment. This risk is more
acute for debt securities with longer maturities.
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;
8
<PAGE> 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- 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 is scheduled to be completed by
December 31, 2001, at which time euro bills and coins will be put into
circulation. The Fund could be affected by certain euro-related issues
(such as accounting differences and valuation problems) during this
transitional period. In addition, certain European Union members, including
the United Kingdom, did not officially implement the euro 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 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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00% none
Maximum sales charge (load)
imposed on reinvested
dividends..................... none none none none
Redemption fee(2)............. none none none none
Exchange fee.................. none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I(4)
- -----------------------------------------------------------------
<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......... 4.85% 4.84% 4.84% 4.76%
Total annual Fund
operating expenses..... 6.10% 6.84% 6.84% 5.76%
Expenses
reimbursed(3).......... 3.88% 3.88% 3.88% 3.88%
Net Fund operating
expenses(3)............ 2.22% 2.96% 2.96% 1.88%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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.
(4)The Fund had no Class I shares outstanding. 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 $ 787 $ 799 $ 299 $ 399 $ 299 $ 191
3rd 1,336 1,326 1,026 1,026 1,026 705
5th 1,909 1,975 1,775 1,775 1,775 1,246
10th 3,459 3,582 3,582 3,747 3,747 2,725
</TABLE>
9
<PAGE> 10
[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 (including
common stock, preferred stock and securities convertible into common stock) 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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).
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
- -- 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.
10
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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 necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q4 '98: 24.15%
Worst quarter Q3 '98: (20.47%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
WORLD
CLASS A CLASS B CLASS C INDEX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............................. 19.23% 20.31% 24.24% 24.94%
Past 5 years.......................... 9.01% 9.15% n/a 19.76%
Since inception:()
Class A(2)............................ 8.88% -- -- 14.34%
Class B(3)............................ -- 7.70% -- 17.86%
Class C(4)............................ -- -- 6.28% 19.39%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The inception date for the Fund's Class A shares was April 18, 1991.
Index performance is calculated from April 30, 1991.
(3)The inception date for the Fund's Class B shares was April 1, 1994.
(4)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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends...... none none none
Redemption fee(2)......... none none none
Exchange fee.............. none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management fees(3)........ 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees...... 0.25% 1.00% 1.00%
Other expenses............ 1.52% 1.59% 1.83%
Total annual Fund
operating expenses........ 2.77% 3.59% 3.83%
Expenses reimbursed(4).... 0.60% 0.60% 0.60%
Net Fund operating
expenses(4)............... 2.17% 2.99% 3.23%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)Management fees are reduced to 0.75% for net assets over $500
million.
(4)The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 782 $ 802 $ 302 $ 426 $ 326
3rd 1,322 1,335 1,035 1,105 1,105
5th 1,886 1,989 1,789 1,903 1,903
10th 3,413 3,591 3,591 3,984 3,984
</TABLE>
11
<PAGE> 12
[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 the equity
securities (including common stock, preferred stock and securities convertible
into common stock) of companies of any size throughout the world that own,
explore or develop natural resources and other basic commodities or supply
goods and services to such companies.
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.
The Fund's manager uses an equity style that focuses on both growth and value.
Companies targeted for investment have strong management and financial
positions, adding balance with established low cost, low debt producers and
positions that are based on anticipated commodity price trends. The Fund may
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: Equity securities typically represents a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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 principally 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.
12
<PAGE> 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q3 '97: 19.66%
Worst quarter Q4 '97: (23.28%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
COMMODITY-
RELATED
CLASS A CLASS B CLASS C INDEX
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ 32.87% 34.87% 37.97% 21.45%
Since inception(2)... 0.13% 0.44% 0.82% 0.46%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The inception date for all Classes was January 1, 1997. Index
performance is calculated from December 31, 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>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none
Redemption fee(2)........ none none none
Exchange fee............. none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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......... 3.28% 3.08% 3.10%
Total annual Fund
operating expenses..... 4.53% 5.08% 5.10%
Expenses
reimbursed(3).......... 2.37% 2.37% 2.37%
Net Fund
operating
expenses(3)............ 2.16% 2.71% 2.73%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 781 $ 774 $ 274 $ 376 $ 276
3rd 1,319 1,253 953 959 959
5th 1,881 1,855 1,655 1,665 1,665
10th 3,404 3,395 3,395 3,539 3,539
</TABLE>
13
<PAGE> 14
[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 the equity
securities (including common stock, preferred stock and securities convertible
into common stock) of companies throughout the world that are expected to
profit from the development, advancement and use of science and technology.
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. Industries that are likely to be represented in the Fund's
portfolio holdings include:
- - Internet;
- - telecommunications and networking equipment;
- - semiconductors and semiconductor equipment;
- - software;
- - computers and peripherals;
- - electronic manufacturing services; and
- - telecommunications 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, which may include the purchase of stock in companies
engaged in initial public offerings.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
INDUSTRY-CONCENTRATION RISK: Since the Fund focuses its investments in
securities of companies principally 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.
14
<PAGE> 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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.
-- 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 necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
------------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q4 '99: 65.43%
Worst quarter Q1 '97: (19.15%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RUSSELL 2000
TECHNOLOGY
CLASS A CLASS B CLASS C CLASS I(2) INDEX
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 109.76% 115.82% 119.98% n/a 101.32%
Since inception(3)... 59.35% 60.79% 61.17% n/a 35.43%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The Fund has had no outstanding Class I shares.
(3)The inception date for all Classes was July 22, 1996. 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>
<CAPTION>
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(1) 5.00% 1.00% none
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption
fee(2).................. none none none none
Exchange fee............ none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I(3)
- ---------------------------------------------------------------
<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....... 0.73% 0.74% 0.68% 0.64%
Total annual Fund
operating expenses... 1.98% 2.74% 2.68% 1.64%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)The Fund had no Class I shares outstanding. 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 $ 764 $ 777 $ 277 $ 371 $ 271 $ 167
3rd 1,161 1,150 850 832 832 517
5th 1,581 1,650 1,450 1,420 1,420 892
10th 2,749 2,888 2,888 3,012 3,012 1,944
</TABLE>
15
<PAGE> 16
[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 (including
common stock, preferred stock and securities convertible into common stock)
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 (including countries with new or
comparatively undeveloped economies). Some of the Fund's investments may produce
income (such as dividends), although it is expected that any income realized
would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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
new or developing economies.
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
- -- 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.
16
<PAGE> 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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 necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '98: 16.49%
Worst quarter Q3 '98: (18.29%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
EAFE
CLASS A CLASS B CLASS C CLASS I(2) INDEX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year.................. 20.44% 21.81% 25.91% n/a 26.96%
Since Inception(3)......... 5.51% 6.04% 7.08% n/a 15.75%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The Fund has had no outstanding Class I shares.
(3)The inception date for all Classes was May 13, 1997. Index performance
is calculated from May 31, 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>
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(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends... none none none none
Redemption fee(2)...... none none none none
Exchange fee........... none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I(3)
- ---------------------------------------------------------------
<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....... 0.62% 0.66% 0.64% 0.53%
Total annual Fund
operating expenses... 1.87% 2.66% 2.64% 1.53%
Expenses
reimbursed(4)........ 0.15% 0.15% 0.15% 0.15%
Net Fund operating
expenses(4).......... 1.72% 2.51% 2.49% 1.38%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)The Fund had no Class I shares outstanding. Percentages shown are
estimates based on expenses for Class A shares
(4)The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 740 $ 754 $ 254 $ 352 $ 252 $ 140
3rd 1,281 1,284 984 978 978 647
5th 1,848 1,937 1,737 1,727 1,727 1,180
10th 3,382 3,540 3,540 3,699 3,699 2,640
</TABLE>
17
<PAGE> 18
[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 equity securities (including
common stock, preferred stock and securities convertible into common stock) of
foreign issuers having total initial market capitalization of less than $2
billion.
To enhance potential return, the Fund may invest in countries with new or
comparatively undeveloped economies. The Fund may also purchase stock in
companies engaged in initial public offerings.
The Fund might also 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.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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.
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
18
<PAGE> 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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.
-- 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-based
index and other indexes that reflect the market sectors in which the Fund
invests. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURN for years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q4 '99: 26.58%
Worst quarter Q3 '98: (14.96%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HSBC JAMES
CAPEL WORLD
(EX-US) SMALL MSCI WORLD
COMPANY (EX-US) SMALL
CLASS A CLASS B CLASS C CLASS I(2) INDEX COMPANY
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Past year............ 31.43% 33.24% 37.36% n/a 33.61% 18.38%
Since inception(3)... 6.58% 6.98% 7.92% n/a 6.36% (1.24%)
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The Fund has had no outstanding Class I shares.
(3)The inception date for all Classes was January 1, 1997. Index
performance is calculated from December 31, 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>
<CAPTION>
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(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption fee(2)....... none none none none
Exchange fee............ none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I(3)
- ---------------------------------------------------------------
<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....... 7.19% 7.21% 7.15% 7.10%
Total annual Fund
operating expenses... 8.44% 9.21% 9.15% 8.10%
Expenses
reimbursed(4)........ 6.23% 6.23% 6.23% 6.23%
Net Fund
operating
expenses(4).......... 2.21% 2.98% 2.92% 1.87%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3)The Fund had no Class I shares outstanding. Percentages shown are
estimates based on expenses for Class A shares.
(4)The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 786 $ 801 $ 301 $ 395 $ 295 $ 190
3rd 1,333 1,332 1,032 1,014 1,014 702
5th 1,905 1,984 1,784 1,756 1,756 1,241
10th 3,449 3,593 3,593 3,711 3,711 2,715
</TABLE>
19
<PAGE> 20
[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 (including
common stock, preferred stock and securities convertible into common stock) of
European companies.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world. Some of the Fund's investments may
produce income (such as dividends), although it is expected that any income
realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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 is scheduled to be completed by December
31, 2001, at which time euro bills and coins will be put into circulation. The
Fund could be affected by certain euro-related issues (such as accounting
differences and valuation problems) during this transitional period. In
addition, certain European Union members, including the United Kingdom, did not
officially implement the euro and may cause market disruptions if they decide to
do so.
- -- 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.
20
<PAGE> 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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 necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q1 '98: 17.61%
Worst quarter Q3 '98: (21.25%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
EUROPE
CLASS A CLASS B CLASS C INDEX
--------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ 11.48% 12.37% 16.23% 15.89%
Since inception:
Class A & B(2)....... 9.01% 9.78% -- 22.12%
Class C(3)........... -- -- 9.97% 20.48%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2)The inception date for Class A & B shares was May 13, 1997. Index
performance is calculated from May 31, 1997.
(3)The inception date for Class C shares was January 29, 1998. Index
performance is calculated from January 31, 1998.
- -- 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>
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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends... none none none
Redemption fee(2)...... none none none
Exchange fee........... none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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......... 3.24% 3.20% 3.29%
Total annual Fund
operating expenses..... 4.49% 5.20% 5.29%
Expenses
reimbursed(3).......... 2.28% 2.28% 2.28%
Net Fund operating
expenses(3)............ 2.21% 2.92% 3.01%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 786 $ 795 $ 295 $ 404 $ 304
3rd 1,333 1,314 1,014 1,041 1,041
5th 1,905 1,956 1,756 1,799 1,799
10th 3,449 3,552 3,552 3,791 3,791
</TABLE>
21
<PAGE> 22
[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 (including
common stock, preferred stock and securities convertible into common stock) and
government and corporate debt securities issued throughout South America,
focusing on Argentina, Brazil, Chile, Colombia, Peru and Venezuela.
The Fund may also have significant investments in Central America and the
Spanish-speaking islands of the Caribbean. To increase its potential yield, the
Fund may invest in low rated debt securities. These securities typically are
rated Ba or below by Moody's or BB or below by S&P (or are judged by the Fund's
manager to be of comparable quality).
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. Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
INTEREST RATE AND MATURITY RISK: The Fund's debt security investments are
susceptible to decline in a rising interest rate environment. This risk is more
acute for debt securities with longer maturities.
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.
22
<PAGE> 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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-based index and other indexes that
reflect the market sectors in which the Fund invests. The Fund's
past performance is not necessarily an indication of how the Fund
will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
- -------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 33.04%
Worst quarter Q3 '98: (30.26%)
*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.
23
<PAGE> 24
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
PAST PAST 5 ---------------------------
YEAR YEARS CLASS A & B(2) CLASS C(3)
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A.............. 37.97% (0.61%) (3.90%) n/a
Class B.............. 40.29% (0.61%) (3.74%) n/a
Class C.............. 44.59% n/a n/a 1.15%
MSCI EMF Latin
America Index........ 58.89% 7.65% 3.50% 11.56%
MSCI Brazil Index.... 79.12% 9.65% 7.24% 16.01%
MSCI Argentina
Index.............. 34.29% 11.45% 6.87% 9.39%
</TABLE>
(1)Performance figures reflect any applicable sales charges.
(2)The inception date for the Fund's Class A and Class B shares was
November 1, 1994.
(3)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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00%
Maximum sales charge (load) imposed on
reinvested dividends.................... none none none
Redemption fee(2)....................... 2.00% 2.00% 2.00%
Exchange fee............................ none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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................... 7.00% 7.03% 6.99%
Total annual Fund
operating expenses............... 8.25% 9.03% 8.99%
Expenses reimbursed(3)........... 6.05% 6.05% 6.05%
Net Fund
operating expenses(3)............ 2.20% 2.98% 2.94%
</TABLE>
(1)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.
(2)If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption
fee. This fee also applies to Class A shares purchased without a
sales charge.
(3)The Fund's Manager has contractually agreed to reimburse the
Fund's expenses for the current fiscal year ending December 31,
2000, 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 certain other expenses). 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 $ 397 $ 297
3rd 1,330 1,332 1,032 1,020 1,020
5th 1,900 1,984 1,784 1,765 1,765
10th 3,440 3,591 3,591 3,729 3,729
</TABLE>
24
<PAGE> 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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. The countries in which the 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 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. Securities purchased are
believed to be attractively valued on one or more of these measures relative to
a broad universe of comparable securities.
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. The countries
in which the 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
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. Securities purchased are believed to be attractively
valued on one or more of these measures relative to a broad universe of
comparable securities.
IVY DEVELOPING MARKETS 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 increase shareholder value
through 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. The
countries in which the 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 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. Securities purchased are believed to
be attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
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
25
<PAGE> 26
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
term earnings growth. Company selection is generally based on an analysis of a
wide range of financial 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. Securities purchased are
believed to be 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 equity securities of
companies that are expected to increase shareholder value through the
development, advancement and use of science and technology. The Fund may also
invest in companies that are expected to profit 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 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. Securities purchased are believed to
be attractively valued on one or more
26
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- --------------------------------------------------------------------------------
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 $2 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. Approximately one half of 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. Securities purchased under this approach are believed to
be attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
The other half of the Fund's portfolio is managed using a "bottom-up" approach,
which focuses on prospects for long-term earnings growth. Company selection for
this segment of the Fund is generally based on an analysis of a wide range of
financial 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 for this segment
are driven by the company selection process.
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. Securities purchased are
believed to be attractively valued on one or more of these measures relative to
a broad universe of comparable securities.
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 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 countries in which the 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 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. Securities
purchased are believed to be attractively valued on one or more of these
measures relative to a broad universe of comparable securities. 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 22).
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), 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.
- -- 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
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INTERNATIONAL EQUITY FUNDS
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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 or
exchange.
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 Additional
Information (see back cover page for information on how you can receive a free
copy).
<TABLE>
<CAPTION>
INVESTMENT
TECHNIQUE: APF ICRF IDMF IEOF IGF IGNRF IGSTF IIF2 IISCF IPEF ISAF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity securities X X X X X X X X X X X
Debt securities...... X X
Low-rated debt
securities........... X X
Foreign securities... X X X X X X X X X X X
Emerging markets..... X X X X X X X X X
Foreign currencies*.. X X X X X X X X X X X
Depository
receipts*........... X X X X X X X X X X X
Derivatives.......... X X X
Illiquid
securities*......... X X X X X X X X X X X
Precious metals...... X
Borrowing............ X X X X X X X X X X X
</TABLE>
*These are not principal strategies, as such, but tend to be associated with the
Funds' principal investments and have their own risks.
RISK CHARACTERISTICS
- - EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
typically rises and falls with a company's success or failure. The market
value of equity securities can fluctuate significantly, with smaller companies
being particularly susceptible to price swings. Transaction costs in smaller-
company securities may also be higher than those of larger companies.
Investors in Ivy European Opportunities Fund, Ivy Global Science & Technology
Fund and Ivy International Small Companies Fund should note that these risks
are heightened in the case of securities issued through IPOs.
- - 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.
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.
- - 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.
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- - 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 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;
- 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).
- - FOREIGN CURRENCIES: Foreign securities may be denominated in foreign
currencies. The value of a 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.
- - 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
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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 exchange transactions and forward foreign currency contracts
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, 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. These techniques also tend to limit any potential gain that
might result from an increase in the value of the hedged position.
- - 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. 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. There is a
risk that the investing fund will not be able to dispose of its illiquid
securities 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 China Region Fund, Ivy
Global Fund, Ivy Global Science & Technology Fund and Ivy International Fund
II may each borrow up to 10% of the value of its total assets from qualified
banks. Ivy Asia Pacific Fund, Ivy Developing Markets Fund, Ivy European
Opportunities Fund, Ivy Global Natural Resources Fund, Ivy International Small
Companies Fund, Ivy Pan-Europe Fund and Ivy South America Fund may each 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.
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- -- 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 is
scheduled to be completed by December 31, 2001, at which time euro bills and
coins will be put into circulation. The Fund could be affected by certain
euro-related issues (such as accounting differences and valuation problems)
during this transitional period. In addition, certain European Union members,
including the United Kingdom, did not officially implement the euro and may
cause market disruptions if they decide to do so.
MANAGEMENT
- -- INVESTMENT ADVISORS
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides business management services to the Funds and investment advisory
services to all Funds other than Ivy Global Natural Resources Fund. IMI is an
SEC-registered investment advisor with over $6.2 billion in assets under
management, and provides similar services to the other ten series of Ivy Fund.
For the Funds' fiscal year ending December 31, 1999, the Funds (other than Ivy
Global Natural Resources Fund) paid IMI a fee that was equal to 1.00% of the
Funds' respective average net assets. Ivy Global Natural Resources Fund paid IMI
a fee equal to 0.50% of the Fund's average net assets. Ivy European
Opportunities Fund pays IMI a fee at the rate of 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. Since February 1, 1999, Henderson has served 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 31 years, and as of March 31, 2000 had over $32 billion in
assets under management. For its services, MFC receives a fee from IMI that is
equal, on an annual basis to 0.50% of the Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY GLOBAL FUND, IVY INTERNATIONAL
FUND II, IVY PAN-EUROPE FUND AND IVY SOUTH AMERICA FUND: 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.
IVY DEVELOPING MARKETS FUND: Moira A. McLachlan is a Vice President of IMI and
head of the Ivy international portfolio management team. Ms. McLachlan joined
IMI in 1995 and has 6 years of professional investment experience. Ms. McLachlan
holds a master's degree in international business from the University of South
Carolina and is a Chartered Financial Analyst.
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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 25 years of investment
experience.
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 15 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 26 years of professional investment experience, holds an
MBA from the Wharton School of Business and is a Chartered Financial Analyst.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund is co-managed by IMI's
International Equity Team and Henderson. 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.
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 quoted sale price on the exchange on which it is
principally traded.
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, 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,
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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:
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.
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
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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. A CDSC of 1.00% may apply to shares redeemed
within two years of the end of the month in which they are purchased. 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 those that employ a registered representative who during a
specified time period sells a minimum dollar amount of the shares of a Fund
and/or other funds distributed by IMDI.
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 IMDI.
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 two years 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
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 reinvested dividends or
distributions, or on shares held over six years. If your shares have appreciated
in value, each share redeemed will include both your original cost (subject to
the above CDSC schedule) and any proportional increase in market value (not
subject to a CDSC). If your shares have depreciated in value, the CDSC will be
assessed on the market value of the shares being redeemed. At the time of
redemption, the calculation is performed on a share-by-share basis as described
below.
Shares will be redeemed 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.
34
<PAGE> 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - 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 33 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., Ste. 300
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 on this page.
- - 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
transmitting redemption orders in proper form and in a timely manner. If you
choose to redeem directly
35
<PAGE> 36
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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.
- - 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.
REDEMPTION FEE: Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Developing
Markets Fund and Ivy South America Fund can experience substantial price
fluctuations and are intended for long-term investors. To facilitate portfolio
management and to compensate for transaction and other expenses caused by early
redemptions or frequent exchange activity, each Fund may charge a 2.00%
redemption fee. This fee is assessed on the net asset value of shares redeemed
or exchanged within one month of their acquisition (either by an exchange from
another Ivy Fund or by direct purchase without a front-end sales charge, in the
case of certain Class A accounts), and is retained by the Fund. This fee is not
a CDSC, is not a commission, and does not benefit IMI or IMSC in any way.
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 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.
- - 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" on page 37).
36
<PAGE> 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 35 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. A redemption fee will be charged on the asset value of shares
exchanged within one month of their acquisition. (See "Redemption Fee" under
"How to redeem shares" above).
- -- 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 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. While
the Funds' managers may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
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
37
<PAGE> 38
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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.
38
<PAGE> 39
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.
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 each Fund's
financial statements, is included in each Fund's Annual Report to
shareholders (which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
SELECTED PER SHARE DATA ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 5.56 $ 6.01 $ 10.00 $ 5.53 $ 5.99 $ 10.00 $ 5.54 $ 5.99 $ 10.00
-------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income (loss) (a)...... .02 .03 .02 (.03) (.01) -- (.03) (.01) --
Net gains or losses on securities
(both realized and unrealized)...... 2.49 (.44) (3.98) 2.44 (.44) (4.00) 2.46 (.43) (3.99)
-------------------------------------------------------------------------------------
Total from investment operations...... 2.51 (.41) (3.96) 2.41 (.45) (4.00) 2.43 (.44) (3.99)
-------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income.......... .02 -- .01 -- -- -- -- -- --
In excess of net investment
income............................ -- .03 .02 -- .01 .01 -- .01 .02
Distributions from capital gains...... .06 .01 -- .03 -- -- .03 -- --
-------------------------------------------------------------------------------------
Total distributions................. .08 .04 .03 .03 .01 .01 .03 .01 .02
-------------------------------------------------------------------------------------
Net asset value, end of period.......... $ 7.99 $ 5.56 $ 6.01 $ 7.91 $ 5.53 $ 5.99 $ 7.94 $ 5.54 $ 5.99
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total return (%)(b)..................... 45.10 (6.86) (39.58) 43.64 (7.48) (39.96) 43.92 (7.37) (39.94)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $2,015 $1,393 $ 692 $3,763 $2,197 $ 929 $3,031 $1,855 $ 764
Ratio of expenses to average net assets
(c)
With expense reimbursement (%)........ 2.39 2.77 2.11 3.17 3.65 2.86 3.09 3.54 2.74
Without expense reimbursement (%)..... 4.03 6.15 10.17 4.81 7.03 10.92 4.73 6.92 10.80
Ratio of net investment income (loss) to
average net assets (%)(a)............. .31 .53 .63 (.46) (.35) (.12) (.38) (.24) --
Portfolio turnover rate (%)............. 24 86 1 24 86 1 24 86 1
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return does not reflect a sales charge.
(c) From 1997 to April 1999, total expenses include fees paid indirectly, if
any, through an offset arrangement.
39
<PAGE> 40
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
IVY CHINA REGION FUND for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61
--------------------------------------------------------------
Income (loss) from investment operations
Net investment loss (a)................................... .08 .13 .02(b) .03 .14
Net gains or losses on securities (both realized and
unrealized)............................................. 2.86 (1.78) (2.28)(b) 1.74 (.01)
--------------------------------------------------------------
Total from investment operations.......................... 2.94 (1.65) (2.26) 1.77 .13
--------------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. .08 .09 -- .03 .14
In excess of net investment income...................... -- -- -- .02 --
Distributions
From capital gains...................................... .01 -- -- -- --
In excess of capital gains.............................. -- -- -- -- .02
--------------------------------------------------------------
Total distributions..................................... .09 .09 -- .05 .16
--------------------------------------------------------------
Net asset value, end of period.............................. $ 9.15 $ 6.30 $ 8.04 $ 10.30 $ 8.58
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%)(c)......................................... 46.72 (20.56) (21.94) 20.50 1.59
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $12,738 $ 9,061 $12,020 $15,290 $12,855
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 2.19 2.30 2.44 2.20 2.20
Without expense reimbursement (%)......................... 2.84 2.86 2.51 2.48 2.73
Ratio of net investment income to average net assets
(%)(a).................................................... 1.01 1.60 .28 .32 1.61
Portfolio turnover rate (%)................................. 23 56 20 22 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.24 $ 7.96 $ 10.28 $ 8.58 $ 8.61
--------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .02 .05 (.04)(b) (.04) .08
Net gains or losses on securities (both realized and
unrealized)............................................. 2.81 (1.73) (2.28)(b) 1.74 (.02)
--------------------------------------------------------------
Total from investment operations.......................... 2.83 (1.68) (2.32) 1.70 .06
--------------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. .02 .04 -- -- .08
In excess of net investment income...................... -- -- -- -- .01
Distributions from capital gains.......................... .01 -- -- -- --
--------------------------------------------------------------
Total distributions..................................... .03 .04 -- -- .09
--------------------------------------------------------------
Net asset value, end of period.............................. $ 9.04 $ 6.24 $ 7.96 $ 10.28 $ 8.58
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%)(c)......................................... 45.33 (21.04) (22.57) 19.67 .83
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,508 $ 6,080 $ 7,893 $ 8,995 $ 6,905
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 2.97 3.08 3.17 2.95 2.95
Without expense reimbursement (%)......................... 3.62 3.64 3.24 3.23 3.48
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .24 .82 (.45) (.43) .86
Portfolio turnover rate (%)................................. 23 56 20 22 25
</TABLE>
40
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
IVY CHINA REGION FUND -----------------------------------------------------------
for the period
April 30th, 1996
for the years ended (commencement)
December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.25 $ 7.94 $10.24 $ 9.44
---------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .02 .08 (.03)(b) --
Net gains or losses on securities (both realized and
unrealized)............................................. 2.82 (1.75) (2.27)(b) .89
---------------------------------------------------------
Total from investment operations.......................... 2.84 (1.67) (2.30) .89
---------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. .01 .02 -- --
In excess of net investment income...................... -- -- -- .09
Distributions from capital gains.......................... .01 -- -- --
---------------------------------------------------------
Total distributions..................................... .02 .02 -- .09
---------------------------------------------------------
Net asset value, end of period.............................. $ 9.07 $ 6.25 $ 7.94 $10.24
---------------------------------------------------------
---------------------------------------------------------
Total return (%)............................................ 45.41(c) (21.02)(c) (22.46)(c) 9.39(f)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 776 $ 704 $1,129 $ 449
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 3.03 2.98 3.05 2.71(e)
Without expense reimbursement (%)......................... 3.68 3.54 3.12 2.99(e)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .18 .92 (.33) (.19)(e)
Portfolio turnover rate (%)................................. 23 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 represents aggregate total return and does not reflect a sales
charge.
41
<PAGE> 42
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY DEVELOPING MARKETS FUND CLASS A
-----------------------------------------------------
for the years ended December 31,
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.02 $ 6.82 $ 10.12 $ 9.05 $ 8.64
----------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .01 .06 .01 (.02) .01
Net gains or losses on securities (both realized and
unrealized)............................................. 2.80 (.86) (2.80) 1.09 .54
----------------------------------------------------
Total from investment operations.......................... 2.81 (.80) (2.79) 1.07 .55
----------------------------------------------------
Less distributions
Dividends
From net investment income............................ .01 -- -- -- .01
In excess of net investment income.................... -- -- .01 -- --
Distributions
From capital gains.................................... .05 -- .30 -- .10
In excess of capital gains............................ -- -- .20 -- .03
----------------------------------------------------
Total distributions..................................... .06 -- .51 -- .14
----------------------------------------------------
Net asset value, end of period.............................. $ 8.77 $ 6.02 $ 6.82 $ 10.12 $ 9.05
----------------------------------------------------
----------------------------------------------------
Total return (%)(c)......................................... 46.70 (11.67) (27.42) 11.83 6.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 5,652 $ 5,487 $ 8,584 $ 9,925 $ 3,435
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 2.30 2.18 2.31 2.45 2.55
Without expense reimbursement (%)......................... 3.28 3.47 2.39 2.82 7.18
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .13 .88 .09 (.23) .24
Portfolio turnover rate (%)................................. 37 47 42 27 14
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
for the years ended December 31,
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.93 $ 6.77 $ 10.04 $ 9.05 $ 8.64
----------------------------------------------------
Income (loss) from investment operations
Net investment (loss) income (a).......................... (.04) .01(b) (.06) (.06)(b) (.02)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.76 (.85)(b) (2.76) 1.05(b) .51
----------------------------------------------------
Total from investment operations.......................... 2.72 (.84) (2.82) .99 .49
----------------------------------------------------
Less distributions
Dividends in excess of net investment income............ -- -- .01 -- --
Distributions
From capital gains.................................... .02 -- .28 -- .08
In excess of capital gains............................ -- -- .16 -- --
----------------------------------------------------
Total distributions..................................... .02 -- .45 -- .08
----------------------------------------------------
Net asset value, end of period.............................. $ 8.63 $ 5.93 $ 6.77 $ 10.04 $ 9.05
----------------------------------------------------
----------------------------------------------------
Total return (%)(c)......................................... 45.82 (12.35) (27.93) 10.95 5.62
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,676 $ 6,145 $ 8,488 $ 6,269 $ 945
Ratio of expenses to average net assets (d)
With expense reimbursement (%)............................ 2.92 2.96 3.09 3.20 3.30
Without expense reimbursement (%)......................... 3.90 4.25 3.17 3.57 7.93
Ratio of net investment (loss) income to average net assets
(%)(a).................................................... (.49) .10 (.69) (.98) (.51)
Portfolio turnover rate (%)................................. 37 47 42 27 14
</TABLE>
42
<PAGE> 43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
IVY DEVELOPING MARKETS FUND --------------------------------------------------------
for the period
April 30, 1996
for the years ended (commencement)
December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.96 $ 6.79 $10.06 $ 9.89
-------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... (.03) .01(b) (.07) (.02)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.76 (.84)(b) (2.76) .19(b)
-------------------------------------------------------
Total from investment operations.......................... 2.73 (.83) (2.83) .17
-------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .01 --
Distributions
From capital gain....................................... .02 -- .27 --
In excess of capital gain............................... -- -- .16 --
-------------------------------------------------------
Total distributions....................................... .02 -- .44 --
-------------------------------------------------------
Net asset value, end of period.............................. $ 8.67 $ 5.96 $ 6.79 $10.06
-------------------------------------------------------
-------------------------------------------------------
Total return (%)............................................ 45.84(c) 12.16(c) (28.01)(b) 2.73(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $3,474 $2,641 $2,420 $1,854
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.85 2.96 3.12 3.16(f)
Without expense reimbursement (%)......................... 3.83 4.25 3.20 3.53(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... (.43) .10 (.72) (.94)(f)
Portfolio turnover rate (%)................................. 37 47 42 27
</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) From 1995 to 1997, total expenses include fees paid indirectly through an
expense offset arrangement.
(e) Total return represents aggregate total return and does not reflect a sales
charge.
(f) Annualized
43
<PAGE> 44
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY EUROPEAN OPPORTUNITIES FUND CLASS A CLASS B CLASS C
------------------------------------------------------------
for the period for the period for the period
May 4, 1999 May 24, 1999 October 24, 1999
(commencement) (commencement) (commencement)
to December 31, to December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.01 $ 10.21 $ 11.57
------------------------------------------------------------
Income from investment operations
Net investment loss(a).................................... -- (.01) (.01)
Net gains on securities (both realized and unrealized).... 16.35 16.15 6.00
------------------------------------------------------------
Total from investment operations.......................... 16.35 16.14 5.99
------------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. .01 -- .01
Distributions from capital gains.......................... 9.22 9.22 .42
------------------------------------------------------------
Total distributions..................................... 9.23 9.22 .43
------------------------------------------------------------
Net asset value, end of period.............................. $ 17.13 $ 17.13 $ 17.13
------------------------------------------------------------
------------------------------------------------------------
Total return (%)(b)......................................... 215.58 209.41 51.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $13,932 $ 5,900 $ 8,076
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 2.22 2.96 2.96
Without expense reimbursement (%)......................... 6.10 6.84 6.84
Ratio of net investment income (loss) to average net assets
(%)(a)(c)................................................. (.15) (.89) (.89)
Portfolio turnover rate (%)................................. 108 108 108
</TABLE>
(a) Net investment loss in net of expenses reimbursed by Manager.
(b) Total return represents aggregate return and does not reflect a sales
charge.
(c) Annualized
44
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
IVY GLOBAL FUND for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23
---------------------------------------------------------------
Income (loss) from investment operations
Net investment income..................................... .01(a) .02(a) .08 .08 .09(a)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.98 .91 (1.23) 1.86 1.25
---------------------------------------------------------------
Total from investment operations.......................... 2.99 .93 (1.15) 1.94 1.34
---------------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- .05 .08 .04
In excess of net investment income...................... -- -- .05 .18 --
Distributions
From capital gains...................................... .89 .54 .99 .48 .49
In excess of capital gains.............................. -- -- -- -- .07
---------------------------------------------------------------
Total distributions....................................... .89 .54 1.09 .74 .60
---------------------------------------------------------------
Net asset value, end of period.............................. $ 13.42 $ 11.32 $ 10.93 $ 13.17 $ 11.97
---------------------------------------------------------------
---------------------------------------------------------------
Total return (%)(b)......................................... 26.51 8.59 (8.72) 16.21 12.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $11,828 $14,660 $19,692 $24,152 $21,264
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.17 2.18 -- -- 2.20
Without expense reimbursement (%)......................... 2.77 2.54 2.07 2.18 2.46
Ratio of net investment income to average net assets (%).... .09(a) .16(a) .58 .58 .71(a)
Portfolio turnover rate (%)................................. 50 17 45 43 53
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 11.99 $ 10.90 $ 13.12 $ 11.97 $ 11.23
---------------------------------------------------------------
Income (loss) from investment operations
Net investment loss....................................... (.10)(a) (.09)(a) (.02) (.02) --(a)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.14 .92 (1.20) 1.85 1.25
---------------------------------------------------------------
Total from investment operations.......................... 2.04 .83 (1.22) 1.83 1.25
---------------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- .05 -- --
In excess of net investment income...................... -- -- .05 .20 --
Distributions
From capital gains...................................... .89 .54 .90 .48 .45
In excess of capital gains.............................. -- -- -- -- .06
---------------------------------------------------------------
Total distributions....................................... .89 .54 1.00 .68 .51
---------------------------------------------------------------
Net asset value, end of period.............................. $ 13.14 $ 11.19 $ 10.90 $ 13.12 $ 11.97
---------------------------------------------------------------
---------------------------------------------------------------
Total return (%)(b)......................................... 25.31 7.69 (9.33) 15.30 11.25
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,316 $ 7,495 $10,056 $ 8,968 $ 4,811
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.99 2.97 -- -- 2.95
Without expense reimbursement (%)......................... 3.59 3.33 2.82 2.94 3.21
Ratio of net investment loss to average net assets (%)...... (.72)(a) (.63)(a) (.18) (.17) (.04)(a)
Portfolio turnover rate (%)................................. 50 17 45 43 53
</TABLE>
45
<PAGE> 46
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
IVY GLOBAL FUND ---------------------------------------------------------
for the period
April 30th, 1996
for the years ended (commencement)
December 31, to December 31,
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.90 $10.67 $12.94 $13.31
------------------------------------------------------
Income (loss) from investment operations
Net investment loss....................................... (.16)(a) (.16)(a) (.02) (.01)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.90 .93 (1.24) .42
------------------------------------------------------
Total from investment operations.......................... 2.74 .77 (1.26) .41
------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- .05 --
In excess of net investment income...................... -- -- .05 .30
Distributions from capital gain........................... .89 .54 .91 .48
------------------------------------------------------
Total distributions....................................... .89 .54 1.01 .78
------------------------------------------------------
Net asset value, end of period.............................. $12.75 $10.90 $10.67 $12.94
------------------------------------------------------
------------------------------------------------------
Total return (%)............................................ 25.24(b) 7.30(b) (9.72)(b) 3.07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 267 $ 428 $ 727 $ 71
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 3.23 3.30 -- --
Without expense reimbursement (%)......................... 3.83 3.66 2.82 3.77(d)
Ratio of net investment loss to average net assets (%)...... (.96)(a) (.96)(a) (.18) (1.01)(d)
Portfolio turnover rate (%)................................. 50 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 represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
46
<PAGE> 47
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
IVY GLOBAL NATURAL ---------------------------------------------------------------------------------------
RESOURCES FUND for the years ended December 31,
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
SELECTED PER SHARE DATA ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 6.32 $ 9.01 $10.00 $ 6.27 $ 9.00 $10.00 $ 6.21 $ 9.00 $10.00
Income (loss) from investment
operations
Net investment income (loss)(a)...... --(b) .03 (.11) (0.4)(b) (.04) (.15) (.04)(b) (.14) (.17)
Net gains or losses on securities
(both realized and unrealized)..... 2.59(b) (2.68) .70 2.54(b) (2.65) .68 2.46(b) (2.61) .68
--------------------------------------------------------------------------------------
Total from investment operations..... 2.59 (2.65) .59 2.50 (2.69) .53 2.42 (2.75) .51
--------------------------------------------------------------------------------------
Less distributions
Dividends in excess of net investment
income............................. -- .04 .22 -- .04 .17 -- .04 .15
Distributions........................
From capital gains................. -- -- 1.08 -- -- 1.08 -- -- 1.08
In excess of capital gains......... -- -- .28 -- -- .28 -- -- .28
--------------------------------------------------------------------------------------
Total distributions................ -- .04 1.58 -- .04 1.53 -- .04 1.51
--------------------------------------------------------------------------------------
Net asset value, end of period......... $ 8.91 $ 6.32 $ 9.01 $ 8.77 $ 6.27 $ 9.00 $ 8.63 $ 6.21 $ 9.00
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Total return (%)(c).................... 40.98 (29.35) 6.95 39.87 (29.82) 6.28 38.97 (30.49) 6.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $ 5,823 $ 1,345 $3,907 $2,520 $ 1,320 $2,706 $ 472 $ 41 $ 124
Ratio of expenses to average net assets
With expense reimbursement (%)....... 2.16 2.22 2.10 2.71 2.90 2.86 2.73 3.57 3.08
Without expense reimbursement (%).... 4.53 5.75 2.88 5.08 6.43 3.64 5.10 7.10 3.86
Ratio of net investment income (loss)
to average net assets (%)(a)......... .02 .29 (1.10) (.53) (.39) (1.86) (.55) (1.06) (2.08)
Portfolio turnover rate (%)............ 157 98 199 157 98 199 157 98 199
</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.
47
<PAGE> 48
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY GLOBAL SCIENCE & ------------------------------------------------------------
TECHNOLOGY FUND for the period
July 22, 1996
for the years ended (commencement)
December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 23.63 $ 17.47 $ 16.40 $10.00
Income from investment operations
Net investment loss........................................ (.43) (.36)(a) (.31)(a) (.06)(b)
Net gains on securities (both realized and unrealized)..... 29.27 6.52(a) 1.38(a) 6.49
------------------------------------------------------
Total from investment operations........................... 28.84 6.16 1.07 6.43
------------------------------------------------------
Less distributions
Distributions from capital gains........................... 3.57 -- -- .03
------------------------------------------------------
Total distributions...................................... 3.57 -- -- .03
------------------------------------------------------
Net asset value, end of period.............................. $ 48.90 $ 23.63 $ 17.47 $16.40
------------------------------------------------------
------------------------------------------------------
Total return (%)............................................ 122.56(c) 35.26(c) 6.53(c) 64.34(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $41,516 $17,888 $12,159 $8,324
Ratio of expenses to average net assets
With expense reimbursement (%)............................. -- -- -- 2.19(e)
Without expense reimbursement (%).......................... 1.98 2.16 2.11 2.90(e)
Ratio of net investment loss to average net assets (%)...... (180) (1.88) (1.91) (2.18)(b)(e)
Portfolio turnover rate (%)................................. 62 73 54 23
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------------------------------------
for the period
July 22, 1996
for the years ended (commencement) for the years ended
December 31, to December 31, December 31,
SELECTED PER ---------------------------------------------------------------------------------------
SHARE DATA 1999 1998 1997 1996 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 23.31 $ 17.37 $ 16.44 $ 10.00 $ 23.38 $ 17.40 $ 16.46
Income from investment
operations
Net investment loss........ (.62) (.50)(a) (.32)(a) (.06)(b) (.70) (.48)(a) (.42)(a)
Net gains on securities
(both realized and
unrealized).............. 28.67 6.44(a) 1.25(a) 6.52 28.87 6.46(a) 1.36(a)
---------------------------------------------------------------------------------------
Total from investment
operations............... 28.05 5.94 .93 6.46 28.17 5.98 .94
---------------------------------------------------------------------------------------
Less distributions
Distributions from capital
gains.................... 3.39 -- -- .02 3.36 -- --
---------------------------------------------------------------------------------------
Total distributions...... 3.39 -- -- .02 3.36 -- --
---------------------------------------------------------------------------------------
Net asset value, end of
period..................... 47.87 $ 23.31 $ 17.73 $ 16.44 $ 48.19 $ 23.38 $ 17.40
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)............ 120.82(c) 34.20(c) 5.66(c) 64.59(d) 120.98(c) 34.37(c) 5.71(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)............. $35,879 $10,197 $ 8,577 $ 3,425 18,769 $ 8,431 $ 6,348
Ratio of expenses to average
net assets
With expense reimbursement
(%)...................... -- -- -- 2.99(e) -- -- --
Without expense
reimbursement (%)........ 2.74 2.95 2.92 3.70(e) 2.68 2.84 2.85
Ratio of net investment loss
to average net assets
(%)........................ (2.55) (2.67) (2.72) (2.98)(b)(e) (2.49) (2.56) (2.65)
Portfolio turnover rate
(%)........................ 62 73 54 23 62 73 54
<CAPTION>
----------------------
for the period
July 22, 1996
(commencement)
to December 31,
SELECTED PER ----------------------
SHARE DATA 1996
- ---------------------------- ----------------------
<S> <C> <C>
Net asset value, beginning
of period.................. $ 10.00
Income from investment
operations
Net investment loss........ (.05)(b)
Net gains on securities
(both realized and
unrealized).............. 6.53
------------------
Total from investment
operations............... 6.48
------------------
Less distributions
Distributions from capital
gains.................... .02
------------------
Total distributions...... .02
------------------
Net asset value, end of
period..................... $ 16.46
------------------
------------------
Total return (%)............ 64.84(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)............. $ 2,106
Ratio of expenses to average
net assets
With expense reimbursement
(%)...................... 2.95(e)
Without expense
reimbursement (%)........ 3.66(e)
Ratio of net investment loss
to average net assets
(%)........................ (2.94)(b)(e)
Portfolio turnover rate
(%)........................ 23
</TABLE>
(a) Based on average shares outstanding.
(b) Net investment loss is net of expenses reimbursed by Manager.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a
sales charge.
(e) Annualized
48
<PAGE> 49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY INTERNATIONAL FUND II ---------------------------------------------------
for the period
for the May 13, 1997
years ended (commencement)
December 31, to December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.48 $ 8.98 $ 10.01
---------------------------------------------------
Income (loss) from investment operations
Net investment income (a)................................. .09 .08 --(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.54 .52 (1.03)(b)
---------------------------------------------------
Total from investment operations.......................... 2.63 .60 (1.03)
---------------------------------------------------
Less distributions
Dividends from net investment income...................... .10 .08 --
Distributions from capital gains.......................... .02 .02 --
---------------------------------------------------
Total distributions..................................... .12 .10 --
---------------------------------------------------
Net asset value, end of period.............................. $ 11.99 $ 9.48 $ 8.98
---------------------------------------------------
---------------------------------------------------
Total return (%)............................................ 27.79(c) 6.63(c) (10.29)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $32,624 $24,993 $16,202
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.72 1.74 1.80(e)
Without expense reimbursement (%)......................... 1.87 1.88 2.11(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .92 .80 .12(e)
Portfolio turnover rate (%)................................. 21 16 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
-----------------------------------------------------------------------------
for the period for the period
for the May 13, 1997 for the May 13, 1997
years ended (commencement) years ended (commencement)
December 31, to December 31, December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
SELECTED PER SHARE DATA -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 9.42 $ 8.93 $ 10.01 $ 9.42 $ 8.93 $ 10.01
-----------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income (loss) (a)..... .01 .01 (.02)(b) .02 .01 (.02)(b)
Net gains or losses on securities
(both realized and unrealized)..... 2.51 .51 (1.06)(b) 2.51 .51 (1.06)(b)
-----------------------------------------------------------------------------
Total from investment operations..... 2.52 .52 (1.08) 2.53 .52 (1.08)
-----------------------------------------------------------------------------
Less distributions
Dividends from net investment
income............................. .01 .01 -- .01 .01 --
Distributions from capital gains..... .02 .02 -- .02 .02 --
-----------------------------------------------------------------------------
Total distributions................ .03 .03 -- .03 .03 --
-----------------------------------------------------------------------------
Net asset value, end of period......... $ 11.91 $ 9.42 $ 8.93 $ 11.92 $ 9.42 $ 8.93
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total return (%)....................... 26.81(c) 5.84(c) (10.29)(d) 26.91(c) 5.79(c) (10.79)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $95,363 $80,938 $53,652 $43,995 $40,408 $27,074
Ratio of expenses to average net assets
With expense reimbursement (%)....... 2.51 2.49 2.63(e) 2.49 2.52 2.63(e)
Without expense reimbursement (%).... 2.66 2.63 2.94(e) 2.64 2.66 2.94(e)
Ratio of net investment income (loss)
to average net assets (%)(a)......... .12 .05 (.71)(e) .14 .03 (.71)(e)
Portfolio turnover rate (%)............ 21 16 10 21 16 10
</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) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Annualized
49
<PAGE> 50
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
IVY INTERNATIONAL SMALL -------------------------------------------------------------------------------------
COMPANIES FUND for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
SELECTED PER SHARE DATA -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 8.95 $8.66 $10.00 $ 8.92 $ 8.63 $ 10.00 $ 8.97 $ 8.65 $10.00
-------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment (loss) income (a)........ (.05) .04 (.01) (.13) (.03) (.05) (.12) (.03) (.06)
Net gains or losses on securities (both
realized and unrealized).............. 3.58 .41 (1.24) 3.54 .41 (1.27) 3.56 .42 (1.25)
-------------------------------------------------------------------------------------
Total from investment operations........ 3.53 .45 (1.25) 3.41 .38 (1.32) 3.44 .39 (1.31)
-------------------------------------------------------------------------------------
Less distributions
Dividends in excess of net investment
income................................ -- .15 -- -- .08 -- -- .06 --
Distributions from capital gains........ .03 .01 .09 .03 .01 .05 .03 .01 .04
-------------------------------------------------------------------------------------
Total distributions................... .03 .16 .09 .03 .09 .05 .03 .07 .04
-------------------------------------------------------------------------------------
Net asset value, end of period............ $12.45 $8.95 $ 8.66 $12.30 $ 8.92 $ 8.63 $12.38 $ 8.97 $ 8.65
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total return (%)(b)....................... 39.45 5.24 (12.52) 38.24 4.46 (13.19) 38.36 4.55 (13.14)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $1,069 $ 980 $ 992 $1,238 $1,027 $ 1,007 $1,196 $1,125 $1,574
Ratio of expenses to average net assets
(c)
With expense reimbursement (%).......... 2.33 2.47 2.50 3.10 3.24 3.31 3.04 3.16 3.23
Without expense reimbursement (%)....... 8.56 6.38 4.87 9.33 7.15 5.68 9.27 7.07 5.60
Ratio of net investment (loss) income to
average net assets (%)(a)............... (.47) .39 (.11) (1.23) (.38) (.91) (1.18) (.30) (.83)
Portfolio turnover rate (%)............... 98 18 10 98 18 10 98 18 10
</TABLE>
(a) Net investment (loss) income 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.
50
<PAGE> 51
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY PAN-EUROPE FUND ------------------------------------------
for the period
May 13, 1997
for the years ended (commencement)
December 31, to December 31,
- --------------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $11.27 $10.56 $10.02
-----------------------------------------
Income from investment operations
Net investment income (loss) (a).......................... .04 (.01)(b) (.02)
Net gains on securities (both realized and unrealized).... 2.01 .72(b) .58
-----------------------------------------
Total from investment operations.......................... 2.05 .71 .56
-----------------------------------------
Less distributions
Dividends from net investment income...................... .01 -- --
Distributions from capital gains.......................... .70 -- .02
-----------------------------------------
Total distributions..................................... .71 -- .02
-----------------------------------------
Net asset value, end of period.............................. $12.61 $11.27 $10.56
-----------------------------------------
-----------------------------------------
Total return (%)............................................ 18.29(c) 6.72(c) 5.54(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,789 $1,862 $ 575
Ratio of expenses to average net assets (e)
With expense reimbursement (%)............................ 2.33 2.49 2.20(f)
Without expense reimbursement (%)......................... 4.61 5.86 28.41(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .32 (.12) (.48)(f)
Portfolio turnover rate (%)................................. 30 25 5
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------------------
for the period for the period
May 13, 1997 for the January 29, 1998
for the years ended (commencement) year ended (commencement
December 31, to December 31, December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $11.17 $10.54 $10.02 $11.17 $10.91
--------------------------------------------------------------------------
Income from investment operations
Net investment loss (a)......................... (.05) (.01)(b) (.03) (.01) (.02)(b)
Net gains on securities (both realized and
unrealized)................................... 1.98 .64(b) .56 2.02 .28(b)
--------------------------------------------------------------------------
Total from investment operations................ 1.93 .63 .53 1.92 .26
--------------------------------------------------------------------------
Less distributions
Dividends from net investment income............ .01 -- -- -- --
Distributions from capital gains................ .60 -- .01 .52 --
--------------------------------------------------------------------------
Total distributions........................... .61 -- .01 .52 --
--------------------------------------------------------------------------
Net asset value, end of period.................... $12.49 $11.17 $10.54 $12.57 $11.17
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total return (%).................................. 17.37(c) 5.98(c) 5.26(d) 17.23(c) 2.38(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $3,081 $3,604 $ 70 $ 397 $ 863
Ratio of expenses to average net assets (e)
With expense reimbursement (%).................. 3.04 3.27 3.29(f) 3.13 3.26(f)
Without expense reimbursement (%)............... 5.32 6.64 29.50(f) 5.41 6.63(f)
Ratio of net investment loss to average net assets
(%)(a).......................................... (.39) (.90) (1.58)(f) (.48) (.89)(f)
Portfolio turnover rate (%)....................... 30 25 5 30 25
</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) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(f) Annualized
51
<PAGE> 52
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
IVY SOUTH AMERICA FUND for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.58 $ 8.96 $ 8.51 $ 6.88 $ 8.37
---------------------------------------------------------------
Income (loss) from investment operations
Net investment income (a)................................. .12 .21 .06 .01 .01
Net gains or losses on securities (both realized
and unrealized)......................................... 2.45 (3.44) .53 1.66 (1.45)
---------------------------------------------------------------
Total from investment operations.......................... 2.57 (3.23) .59 1.67 (1.44)
---------------------------------------------------------------
Less distributions
Dividends from net investment income...................... .32 -- .04 -- --
Distributions from capital gains.......................... -- .15 .10 .04 --
Returns of capital........................................ -- -- -- -- .05
---------------------------------------------------------------
Total distributions..................................... .32 .15 .14 .04 .05
---------------------------------------------------------------
Net asset value, end of period.............................. $ 7.83 $ 5.58 $ 8.96 $ 8.51 $ 6.88
---------------------------------------------------------------
---------------------------------------------------------------
Total return (%)(b)......................................... 46.39 (36.07) 7.03 24.22 (17.28)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,478 $ 1,638 $ 5,671 $ 4,016 $ 2,015
Ratio of expenses to average net assets (c)
With expense reimbursement (%)............................ 2.20 2.38 2.45 2.55 2.61
Without expense reimbursement (%)......................... 8.25 5.09 3.18 4.89 9.26
Ratio of net investment income to average net assets
(%)(a).................................................... 1.44 1.96 .65 .24 .22
Portfolio turnover rate (%)................................. 3 26 10 20 45
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
for the years ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37
---------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .05 .12 (.01) (.03) (.02)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.44 (3.39) .53 1.63 (1.47)
---------------------------------------------------------------
Total from investment operations.......................... 2.49 (3.27) .52 1.60 (1.49)
---------------------------------------------------------------
Less distributions
Dividends from net investment income...................... .28 -- -- -- --
Distributions from capital gains.......................... -- .15 .06 -- --
---------------------------------------------------------------
Total distributions..................................... .28 .15 .06 -- --
---------------------------------------------------------------
Net asset value, end of period.............................. $ 7.73 $ 5.52 $ 8.94 $ 8.48 $ 6.88
---------------------------------------------------------------
---------------------------------------------------------------
Total return (%)(b)......................................... 45.29 (36.59) 6.18 23.26 (17.90)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,237 $ 972 $ 3,028 $ 2,025 $ 684
Ratio of expenses to average net assets (c)
With expense reimbursement (%)............................ 2.98 3.18 3.23 3.33 3.36
Without expense reimbursement (%)......................... 9.03 5.89 3.96 5.67 10.01
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .66 1.16 (.13) (.54) (.53)
Portfolio turnover rate (%)................................. 3 26 10 20 45
</TABLE>
52
<PAGE> 53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
IVY SOUTH AMERICA FUND -----------------------------------------------------------
for the period
April 30th, 1996
for the years ended (commencement)
December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.48 $ 8.89 $ 8.46 $ 7.96
---------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .03 .12 (.02) (.02)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.45 (3.38) .53 .55
---------------------------------------------------------
Total from investment operations.......................... 2.48 (3.26) .51 .53
---------------------------------------------------------
Less distributions
Dividends from net investment income...................... .33 -- -- --
Distributions from capital gains.......................... -- .15 .08 .03
---------------------------------------------------------
Total distributions..................................... .33 .15 .08 .03
---------------------------------------------------------
Net asset value, end of period.............................. $ 7.63 $ 5.48 $ 8.89 $ 8.46
---------------------------------------------------------
---------------------------------------------------------
Total return (%)............................................ 45.59(b) (36.69)(b) 6.06(b) 6.66(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 141 $ 148 $ 453 $ 111
Ratio of expenses to average net assets (c)
With expense reimbursement (%)............................ 2.94 3.21 3.30 3.46(e)
Without expense reimbursement (%)......................... 8.99 5.92 4.03 5.80(e)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .70 1.13 (.20) (.68)(e)
Portfolio turnover rate (%)................................. 3 26 10 20
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return does not reflect a sales charge.
(c) From 1995 to 1998, 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
53
<PAGE> 54
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
54
<PAGE> 55
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
55
<PAGE> 56
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
56
<PAGE> 57
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.)
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:
<TABLE>
<S> <C>
$ _______________ Ivy Asia Pacific Fund $ _______________ Ivy Global Science & Technology Fund*
$ _______________ Ivy China Region Fund $ _______________ Ivy International Fund II*
$ _______________ Ivy Developing Markets Fund $ _______________ Ivy International Small Companies Fund*
$ _______________ Ivy European Opportunities Fund* $ _______________ Ivy Pan-Europe Fund
$ _______________ Ivy Global Fund $ _______________ Ivy South America Fund
$ _______________ Ivy Global Natural Resources 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> 58
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: ______________________________________________________
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
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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 Markets Fund Class A IVCAX 465897841
Ivy Developing Markets Fund Class B IVCBX 465897833
Ivy Developing Markets Fund Class C IVCCX 465897569
Ivy European Opportunities Fund Class A IEOAX 465898815
Ivy European Opportunities Fund Class B IEOBX 465898823
Ivy European Opportunities Fund Class C IEOCX 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 IPEAX 465897387
Ivy Pan-Europe Fund Class B IPEBX 465897379
Ivy Pan-Europe Fund Class C IPECX 465897361
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>
* Symbol not assigned as of this printing.
<PAGE> 60
(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
1, 2000 (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
each Fund's 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, Ste. 300
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 1-202-942-8090 for
further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01INTLX0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our website at
www.ivymackenzie.com.
<PAGE> 61
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 1, 2000 INTERNATIONAL EQUITY FUNDS ADVISOR CLASS SHARES
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING MARKETS 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 PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
Ivy Fund is a registered open-end investment company consisting
of twenty-one separate portfolios. This Prospectus relates to
the Advisor Class shares of the eleven 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 Asia Pacific Fund
4 Ivy China Region Fund
6 Ivy Developing Markets Fund
8 Ivy European Opportunities Fund
10 Ivy Global Fund
12 Ivy Global Natural Resources Fund
14 Ivy Global Science & Technology Fund
16 Ivy International Fund II
18 Ivy International Small Companies Fund
20 Ivy Pan-Europe Fund
22 Ivy South America Fund
24 Additional Information about principal
investment strategies and risks
30 Management
32 Shareholder information
36 Financial highlights
49 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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> 62
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
- -------------------------------
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 (including
common stock, preferred stock and securities convertible into common stock)
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.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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> 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
necessarily 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: 43.90%
Worst quarter Q2 '98: (34.21%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI FAR
EAST FREE
(EX-JAPAN)
CLASS A INDEX
--------------------------------------------------------
<S> <C> <C>
Past year........................ 36.76% 59.40%
Since inception(*)............... (8.38%) (6.98%)
</TABLE>
* The inception date for Class A shares was January 1, 1997. Index
performance is calculated from December 31, 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(1)......................... 2.00%
Exchange fee.............................. none
</TABLE>
<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............................ 2.48%
Total annual Fund operating expenses...... 3.48%
Expenses reimbursed(2).................... 1.64%
Net Fund operating expenses(2)............ 1.84%
</TABLE>
(1) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption
fee.
(2) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 187
3rd 693
5th 1,226
10th 2,684
</TABLE>
3
<PAGE> 64
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
- -------------------------------
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 (including
common stock, preferred stock and securities convertible into common stock) of
companies that are located or have a substantial business presence in the China
region, focusing on China, Hong Kong, Taiwan and South Korea.
For these purposes, a company with a "substantial business presence" in the
China region is one that:
- - is organized in (or whose securities are principally traded in) the China
region,
- - has at least 35% of its assets in one or more China region countries,
- - derives at least 35% of its gross sales revenues or profits from providing
goods or services to or from one or more China region countries, or
- - has significant manufacturing or other operations in one or more China region
countries.
The Fund may also invest in equity securities of companies whose current or
expected performance, based on factors such as growth trends in the geographic
location of the companies' assets and the sources of their revenues and profits,
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. Some of the Fund's
investments may produce income (such as dividends), although it is expected that
any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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> 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on February 10, 1998 with a broad-based index and other
indexes that reflect the market sectors in which the Fund invests. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHINA REGION FUND BAR GRAPH)
Best quarter Q2 '99: 40.51%
Worst quarter Q3 '99: (8.01%)
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIPPER
HANG MSCI IFC CHINA
ADVISOR SENG TAIWAN CHINA REGION
CLASS INDEX INDEX INDEX CATEGORY
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 46.29% 68.80% 52.71% 105.25% 62.35%
Since inception*..... 9.01% 37.12% 28.10% 19.93% 18.26%
</TABLE>
*The inception date for Advisor Class shares was February 10, 1998. MSCI
Taiwan Index is calculated from January 31, 1998.
- -- 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*........................... 2.00%
Exchange fee.............................. none
</TABLE>
<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............................ 1.44%
Total annual Fund operating expenses...... 2.44%
Expenses reimbursed**..................... 0.65%
Net Fund operating expenses**............. 1.79%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption fee.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 182
3rd 678
5th 1,201
10th 2,634
</TABLE>
5
<PAGE> 66
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
- --------------------------------------------------------------------------------
- -------------------------------
IVY DEVELOPING
MARKETS 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 (including
common stock, preferred stock and securities convertible into common stock) of
companies that are located in, or are expected to profit from, countries whose
markets are generally viewed as "developing" or "emerging" by the World Bank
and the International Finance Corporation, or classified as "emerging" by the
United Nations.
For these purposes, a company "located in" or "expected to profit" from emerging
market countries is one:
- - whose securities are principally trading in one or more emerging market
countries,
- - that derives at least 50% of its total revenue from goods, sales or services
in one or more emerging market countries, or
- - that is organized under the laws of (and has a principal office in) an
emerging market country.
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. Some of the Fund's
investments may produce income (such as dividends), although it is expected that
any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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> 67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on April 30, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(DEVELOPING NATIONS FUND BAR GRAPH)
Best quarter: Q2 '99: 35.67%
Worst quarter: Q3 '99: (7.99%)
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
EMERGING
ADVISOR MARKETS
CLASS FREE INDEX
----------------------------------------------------------
<S> <C> <C>
Past year............................ 47.38% 66.41%
Since inception*..................... 11.13% 10.58%
</TABLE>
*The inception date for Advisor Class shares was April 30, 1998.
- -- 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*........................... 2.00%
Exchange fee.............................. none
</TABLE>
<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........................... 1.72%
Total annual Fund operating expenses..... 2.72%
Expenses reimbursed**.................... 0.98%
Net Fund operating expenses**............ 1.74%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption fee.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 177
3rd 663
5th 1,175
10th 2,583
</TABLE>
7
<PAGE> 68
[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 (including common stock, preferred stock and securities convertible
into common stock) of European companies, which may include:
- - large European companies, or European companies of any size that provide
special investment opportunities (such as privatized companies, those
providing exceptional value, or those engaged in initial public offerings);
- - small-capitalization companies in the more developed markets of Europe; and
- - companies operating in Europe's emerging markets.
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). These
securities typically are rated Ba or below by Moody's or BB or below by S&P (or
are judged by the Fund's manager to be of comparable quality).
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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
INTEREST RATE AND MATURITY RISK: The Fund's debt security investments are
susceptible to decline in a rising interest rate environment. The risk is more
acute for debt securities with longer maturities.
8
<PAGE> 69
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 is scheduled to be completed by
December 31, 2001, at which time euro bills and coins will be put into
circulation. The Fund could be affected by certain euro-related issues
(such as accounting differences and valuation problems) during this
transitional period. In addition, certain European Union members, including
the United Kingdom, did not officially implement the euro and may cause
market disruptions if they decide to do so.
- -- 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 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>
<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>
<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........................... 4.81%
Total annual Fund operating expenses..... 5.81%
Expenses reimbursed**.................... 3.88%
Net Fund operating expenses**............ 1.93%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**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 certain other
expenses). 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>
9
<PAGE> 70
(GLOBE ARTWORK)
[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 (including
common stock, preferred stock and securities convertible into common stock) 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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).
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
- -- 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.
10
<PAGE> 71
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on April 30, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q2 '99: 16.41%
Worst quarter Q3 '99: 3.80%
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
ADVISOR WORLD
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year.............................. 26.77% 24.94%
Since inception(*)..................... 8.07% 19.47%
</TABLE>
(*) The inception date for Advisor Class shares was April 30, 1998.
- -- 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(1)......................... none
Exchange fee.............................. none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Management fees(2)....................... 1.00%
Distribution and/or service (12b-1)
fees..................................... none
Other expenses........................... 1.56%
Total annual Fund operating expenses..... 2.56%
Expenses reimbursed(3)................... 0.60%
Net Fund operating expenses(3)........... 1.96%
</TABLE>
(1) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(2) Management fees are reduced to 0.75% for net assets over $500
million.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 199
3rd 729
5th 1,286
10th 2,805
</TABLE>
11
<PAGE> 72
[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 the equity
securities (including common stock, preferred stock and securities convertible
into common stock) of companies of any size throughout the world that own,
explore or develop natural resources and other basic commodities or supply
goods and services to such companies.
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.
The Fund's manager uses an equity style that focuses on both growth and value.
Companies targeted for investment have strong management and financial
positions, adding balance with established low cost, low debt producers and
positions that are based on anticipated commodity price trends. The Fund may
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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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 principally 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.
12
<PAGE> 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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.
-- 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
necessarily 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 Q3 '97: 19.66%
Worst quarter Q4 '97: (23.28%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
COMMODITY-
RELATED
CLASS A INDEX
- ---------------------------------------------------
<S> <C> <C>
Past year.................... 32.87% 21.45%
Since inception*............. 0.13% 0.46%
</TABLE>
*The inception date for Class A shares was January 1, 1997. Index
performance is calculated from December 31, 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>
<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........................... 3.24%
Total annual Fund operating expenses..... 4.24%
Expenses reimbursed**.................... 2.37%
Net Fund operating expenses**............ 1.87%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 190
3rd 702
5th 1,241
10th 2,715
</TABLE>
13
<PAGE> 74
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
- -------------------------------
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
(including common stock, preferred stock and securities convertible into common
stock) of companies throughout the world that are expected to profit from the
development, advancement and use of science and technology.
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. Industries that are likely to be represented in the Fund's
portfolio holdings include:
- - Internet;
- - telecommunications and networking equipment;
- - semiconductors and semiconductor equipment;
- - software;
- - computers and peripherals;
- - electronic manufacturing services; and
- - telecommunications 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, which may include the purchase of stock in companies engaged in
initial public offerings.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
INDUSTRY-CONCENTRATION RISK: Since the Fund focuses its investments in
securities of companies principally 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
14
<PAGE> 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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.
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on April 15, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 65.47%
Worst quarter Q3 '99: 9.36%
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RUSSELL 2000
ADVISOR TECHNOLOGY
CLASS INDEX
- ----------------------------------------------
<S> <C> <C>
Past year............ 122.56% 101.32%
Since inception*..... 74.87% 47.95%
</TABLE>
*The inception date for Advisor Class shares was April 15, 1998.
Index performance is calculated from April 30, 1998.
- -- 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........................... 0.89%
Total annual Fund operating expenses..... 1.89%
</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 $ 192
3rd 594
5th 1,021
10th 2,212
</TABLE>
15
<PAGE> 76
[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 (including
common stock, preferred stock and securities convertible into common stock)
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 (including countries with new or
comparatively undeveloped economies). Some of the Fund's investments may produce
income (such as dividends), although it is expected that any income realized
would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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
new or developing economies.
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
- -- 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.
16
<PAGE> 77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on February 23, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(Chart)
Best quarter Q4 '99: 13.77%
Worst quarter Q3 '99: 0.94%
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR MSCI EAFE
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year........................... 28.30% 26.96%
Since inception*.................... 14.33% 18.73%
</TABLE>
*The inception date for Advisor Class shares was February 23, 1998. Index
performance is calculated from February 28, 1998.
- -- 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>
<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>
<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........................... 0.53%
Total annual Fund operating expenses..... 1.53%
Expenses reimbursed**.................... 0.15%
Net Fund operating expenses**............ 1.38%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 140
3rd 469
5th 820
10th 1,811
</TABLE>
17
<PAGE> 78
[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 equity securities (including
common stock, preferred stock and securities convertible into common stock) of
foreign issuers having total initial market capitalization of less than $2
billion.
To enhance potential return, the Fund may invest in countries with new or
comparatively undeveloped economies. The Fund may also purchase stock in
companies engaged in initial public offerings.
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.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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.
DERIVATIVES RISK: The Fund may, but is not required to, use certain derivative
investment techniques to hedge various market risks (such as currency exchange
rates). The use of these 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 had not
been used.
18
<PAGE> 79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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.
-- 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
necessarily 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 '99: 26.58%
Worst quarter Q3 '98: (14.96%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HSBC JAMES
CAPEL WORLD MSCI WORLD
(EX-US) SMALL (EX-US) SMALL
CLASS A COMPANY INDEX COMPANY
- --------------------------------------------------------------
<S> <C> <C> <C>
Past year............ 31.43% 33.61% 18.38%
Since inception*..... 6.58% 6.36% (1.24%)
</TABLE>
*The inception date for Class A shares was January 1, 1997. Index
performance is calculated from December 31, 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>
<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............................ 6.94%
Total annual Fund operating expenses...... 7.94%
Expenses reimbursed**..................... 6.23%
Net Fund operating expenses**............. 1.71%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 174
3rd 654
5th 1,160
10th 2,552
</TABLE>
19
<PAGE> 80
(GLOBE ARTWORK)
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
- -------------------------------
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 (including
common stock, preferred stock and securities convertible into common stock) of
European companies.
The Fund's management team uses a disciplined value approach while looking for
investment opportunities around the world. Some of the Fund's investments may
produce income (such as dividends), although it is expected that any income
realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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 is scheduled to be completed by December
31, 2001, at which time euro bills and coins will be put in circulation. The
Fund could be affected by certain euro-related issues (such as accounting
differences and valuation problems) during this transitional period. In
addition, certain European Union members, including the United Kingdom, did not
officially implement the euro and may cause market disruptions if they decide to
do so.
- -- 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.
20
<PAGE> 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on March 23, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 8.32%
Worst quarter Q3 '99: 1.73%
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR MSCI EUROPE
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year......................... 18.50% 15.89%
Since inception*.................. 4.75% 12.98%
</TABLE>
*The inception date for Advisor Class shares was March 23, 1998. Index
performance is calculated from March 31, 1998.
- -- 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>
<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........................... 3.19%
Total annual Fund operating expenses..... 4.19%
Expenses reimbursed**.................... 2.28%
Net Fund operating expenses**............ 1.91%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 other expenses). 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 $ 194
3rd 714
5th 1,261
10th 2,755
</TABLE>
21
<PAGE> 82
[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 (including
common stock, preferred stock and securities convertible into common stock) and
government and corporate debt securities issued throughout South America,
focusing on Argentina, Brazil, Chile, Colombia, Peru and Venezuela.
The Fund may also have significant investments in Central America and the
Spanish-speaking islands of the Caribbean. To increase its potential yield, the
Fund may invest in low-rated debt securities. These securities typically are
rated Ba or below by Moody's or BB or below by S&P (or are judged by the Fund's
manager to be of comparable quality).
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. Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
INTEREST RATE AND MATURITY RISK: The Fund's debt security investments are
susceptible to decline in a rising interest rate environment. The risk is more
acute for debt securities with longer maturities.
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 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.
22
<PAGE> 83
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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-based
index and other indexes that reflect the market sectors in which the Fund
invests. The Fund's past performance is not necessarily 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>
(SOUTH AMERICA FUND BAR GRAPH)
Best quarter Q4 '99: 33.04%
Worst quarter Q3 '98: (30.26%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI EMF
LATIN MSCI MSCI
AMERICA BRAZIL ARGENTINA
CLASS A INDEX INDEX INDEX
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ 37.97% 58.89% 79.12% 34.29%
Since inception*..... (3.90%) 3.50% 7.24% 6.87%
</TABLE>
*The inception date for Class A shares was November 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
- -----------------------------------------------------
</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*............................ 2.00%
Exchange fee............................... none
</TABLE>
<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........................... 6.48%
Total annual Fund operating expenses..... 7.48%
Expenses reimbursed**.................... 6.05%
Net Fund operating expenses**............ 1.43%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
Following an exchange into the Fund, shares redeemed (or
exchanged) within one month are subject to a 2.00% redemption fee.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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 $ 146
3rd 568
5th 1,017
10th 2,262
</TABLE>
23
<PAGE> 84
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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. The countries in which the 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 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. Securities purchased are
believed to be attractively valued on one or more of these measures relative to
a broad universe of comparable securities.
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. The countries
in which the 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
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. Securities purchased are believed to be attractively
valued on one or more of these measures relative to a broad universe of
comparable securities.
IVY DEVELOPING MARKETS 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 increase shareholder value
through 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. The
countries in which the 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 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. Securities purchased are believed to
be attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
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
24
<PAGE> 85
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
financial 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. Securities purchased are
believed to be 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 equity securities of
companies that are expected to increase shareholder value through the
development, advancement and use of science and technology. The Fund may also
invest in companies that are expected to profit 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 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.
25
<PAGE> 86
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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 $2 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. Approximately one half of 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. Securities purchased under this approach are believed to
be attractively valued on one or more of these measures relative to a broad
universe of comparable securities.
The other half of the Fund's portfolio is managed using a "bottom-up" approach,
which focuses on prospects for long-term earnings growth. Company selection for
this segment of the Fund is generally based on an analysis of a wide range of
financial 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 for this segment
are driven by the company selection process.
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.
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 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 countries in which the 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 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. Securities
purchased are believed to be attractively valued on one or more of these
measures relative to a broad universe of comparable securities. 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 22).
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), 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.
- -- 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,
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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 or
exchange.
OTHER RISKS: The following table 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 certain 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: IAPF ICRF IDMF IEOF IGF IGNRF IGSTF IIF2 IISCF IPEF ISAF
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity securities.... X X X X X X X X X X X
Debt securities...... X X
Low-rated debt
securities........... X X
Foreign securities... X X X X X X X X X X X
Emerging markets..... X X X X X X X X X
Foreign
currencies*.......... X X X X X X X X X X X
Depository
receipts*............ X X X X X X X X X X X
Derivatives.......... X X X
Illiquid
securities*.......... X X X X X X X X X X X
Precious metals...... X
Borrowing............ X X X X X X X X X X X
</TABLE>
* These are not principal strategies, as such, but tend to be associated with
the Funds' principal investments and have their own risks.
RISK CHARACTERISTICS:
- - EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller company
securities may also be higher than those of larger companies. Investors in Ivy
European Opportunities Fund, Ivy Global Science & Technology Fund and Ivy
International Small Companies Fund should note that these risks are heightened
in the case of securities issued through IPOs.
- - 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.
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.
- - 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
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INTERNATIONAL EQUITY FUNDS
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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 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;
- 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).
- - FOREIGN CURRENCIES: Foreign securities may be denominated in foreign
currencies. The value of a 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.
- - 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.
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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 exchange transactions 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, 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. These techniques also tend to limit any
potential gain that might result from an increase in the value of the hedged
position.
- - 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. 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. There is a
risk that the investing fund will not be able to dispose of its illiquid
securities 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 China Region Fund, Ivy
Global Fund, Ivy Global Science & Technology Fund and Ivy International Fund
II may each borrow up to 10% of the value of its total assets from qualified
banks. Ivy Asia Pacific Fund, Ivy Developing Markets Fund, Ivy European
Opportunities Fund, Ivy Global Natural Resources Fund, Ivy International Small
Companies Fund, Ivy Pan-Europe Fund and Ivy South America Fund may each 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
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INTERNATIONAL EQUITY FUNDS
- --------------------------------------------------------------------------------
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: 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 is
scheduled to be completed by December 31, 2001, at which time euro bills and
coins will be put into circulation. The Fund could be affected by certain
euro-related issues (such as accounting differences and valuation problems)
during this transitional period. In addition, certain European Union members,
including the United Kingdom, did not officially implement the euro and may
cause market disruptions if they decide to do so.
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 $6.2 billion in assets under
management, and provides similar services to the other ten series of Ivy Fund.
For the Funds' fiscal year ended December 31, 1999, the Funds (other than Ivy
Global Natural Resources Fund) each paid IMI a fee that was equal to 1.00% of
the Funds' respective average net assets. Ivy Global Natural Resources Fund paid
IMI a fee equal to 0.50% of the Fund's average net assets. Ivy European
Opportunities Fund pays IMI a fee at the rate of 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. Since February 1, 1999, Henderson has served 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 31 years, and as of March 31, 2000 had over $32 billion in
assets under management. For its services, MFC receives a fee from IMI that is
equal, on an annual basis to 0.50% of the Fund's average net assets.
- -- PORTFOLIO MANAGEMENT
IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY GLOBAL FUND, IVY INTERNATIONAL
FUND II, IVY PAN-EUROPE FUND AND IVY SOUTH AMERICA FUND: 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.
IVY DEVELOPING MARKETS FUND: Moira A. McLachlan is a Vice President of IMI and
head of the Ivy international portfolio management team.
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Ms. McLachlan joined IMI in 1995 and has 6 years of professional investment
experience. Ms. McLachlan holds a master's degree in international business from
the University of South Carolina and is a Chartered Financial Analyst.
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 25 years of investment
experience.
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 15 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 26 years of professional investment experience, holds an
MBA from the Wharton School of Business and is a Chartered Financial Analyst.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund is co-managed by IMI's
International Equity Team and Henderson. 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.
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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 quoted sale price on the exchange on which it is
principally traded.
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, 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
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Prospectus. Enclose a check payable to the Fund in which you wish to invest. You
should note on the check that you wish to invest in Advisor Class shares (see
page 32 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., Ste. 300
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
transmitting redemption orders in proper form and 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.
- - 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.
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- - 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: Ivy Asia Pacific Fund, Ivy China Region Fund, Ivy Developing
Markets Fund and Ivy South America Fund can experience substantial price
fluctuations and are intended for long-term investors. To facilitate portfolio
management and to compensate for transaction and other expenses caused by
early redemptions or frequent exchange activity, each Fund may charge a 2.00%
redemption fee. This fee is assessed on the net asset value of shares redeemed
or exchanged within one month of their acquisition (either by an exchange from
another Ivy Fund or by direct purchase), and is retained by the Fund. This fee
is not a CDSC, is not a commission, and does not benefit IMI or IMSC in any
way.
OTHER 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.
- - 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" 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 33 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. A redemption fee will be charged on the asset value of shares
exchanged within one month of their acquisition. (See "Redemption Fee" under
"How to redeem shares" above).
- -- DIVIDENDS, DISTRIBUTIONS AND TAXES
- - The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
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- - 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 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. While
the Funds' managers may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
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.
35
<PAGE> 96
[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.
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 each Fund's Annual Report to shareholders (which
is available upon request).
<TABLE>
<CAPTION>
IVY ASIA PACIFIC FUND for the period
July 1, 1999
(commencement)
To December 31,
1999
SELECTED PER SHARE DATA ---------------
<S> <C>
Net asset value, beginning of period........................ $ 7.76
---------------
Income from investment operations
Net investment income(a).................................. .02
Net gains on securities (both realized and unrealized).... .30
---------------
Total from investment operations.......................... .32
---------------
Less distributions
Dividends from net investment income...................... .05
Distributions from capital gains.......................... .06
---------------
Total distributions..................................... .11
---------------
Net asset value, end of period.............................. $ 7.97
---------------
Total return(%)(b).......................................... 4.14
===============
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 136
Ratio of expenses to average net assets(c)
With expense reimbursement(%)............................. 2.02
Without expense reimbursement(%).......................... 3.66
Ratio of net investment income to average net
assets(%)(a)(c)........................................... .69
Portfolio turnover rate(%).................................. 24
</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
36
<PAGE> 97
<TABLE>
<CAPTION>
IVY CHINA REGION FUND for the period
for the year February 10, 1998
ended (commencement)
December 31, to December 31,
1999 1998
SELECTED PER SHARE DATA -------------- ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 6.27 $ 7.89
-------------- ----------------
Income (loss) from investment operations
Net investment income(a).................................. .04 .08
Net gains or losses on securities (both realized and
unrealized)............................................. 2.86 (1.62)
-------------- ----------------
Total from investment operations.......................... 2.90 (1.54)
-------------- ----------------
Less distributions
From net investment income................................ .13 .08
Distributions from capital gains.......................... .01 --
-------------- ----------------
Total distributions..................................... .14 .08
-------------- ----------------
Net asset value, end of period.............................. $ 9.03 $ 6.27
============== ================
Total return (%)............................................ 46.29(b) (19.56)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 313 $ 10
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.79 2.92(d)(e)
Without expense reimbursement (%)......................... 2.44 3.48(d)(e)
Ratio of net investment income to average net assets
(%)(a).................................................... 1.42 .98(e)
Portfolio turnover rate (%)................................. 23 56
</TABLE>
(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) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(e) Annualized
37
<PAGE> 98
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY DEVELOPING NATIONS FUND for the period
for the year April 30, 1998
ended (commencement)
December 31, to December 31,
1999 1998
SELECTED PER SHARE DATA ------------ --------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 6.05 $ 7.48
------------ --------------
Income (loss) from investment operations
Net investment income(a).................................. .03 .04(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.83 (1.47)(b)
------------ --------------
Total from investment operations.......................... 2.86 (1.43)
------------ --------------
Less distributions
Dividends from net investment income...................... .06 --
Distributions from capital gains.......................... .05 --
------------ --------------
Total distributions..................................... .11 --
------------ --------------
Net asset value, end of period.............................. $ 8.80 $ 6.05
============ ==============
Total return (%)............................................ 47.38(c) (19.06)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 337 $ 82
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.74 1.68(e)
Without expense reimbursement (%)......................... 2.72 2.97(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .69 1.38(e)
Portfolio turnover rate (%)................................. 37 47
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager.
(b) Based on average shares outstanding
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Annualized
38
<PAGE> 99
<TABLE>
<CAPTION>
IVY EUROPEAN OPPORTUNITIES FUND for the period
May 3, 1999
(commencement)
to December 31,
1999
SELECTED PER SHARE DATA ---------------
<S> <C>
Net asset value, beginning of period........................ $ 10.01
---------------
Income from investment operations
Net investment income(a).................................. --
Net gains on securities (both realized and unrealized).... 16.46
---------------
Total from investment operations.......................... 16.46
---------------
Less distributions
Dividends in excess of net investment income.............. .02
Distributions from capital gains.......................... 9.22
---------------
Total distributions..................................... 9.24
---------------
Net asset value, end of period.............................. $ 17.23
===============
Total return (%)(b)......................................... 217.16
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 5,246
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 1.93
Without expense reimbursement (%)......................... 5.81
Ratio of net investment income to average net assets
(%)(a)(c)................................................. .14
Portfolio turnover rate (%)................................. 108
</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
39
<PAGE> 100
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY GLOBAL FUND for the period
April 30, 1998
(commencement)
to December 31,
1999 1998
SELECTED PER SHARE DATA ------------ ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $11.36 $ 13.26
------------ ----------------
Income (loss) from investment operations
Net investment income(a).................................. .08 .05
Net gains or losses on securities (both realized and
unrealized)............................................. 2.95 (1.41)
------------ ----------------
Total from investment operations.......................... 3.03 (1.36)
------------ ----------------
Less distributions
Distributions from capital gains.......................... .89 .54
------------ ----------------
Total distributions..................................... .89 .54
------------ ----------------
Net asset value, end of period.............................. $13.50 $ 11.36
============ ================
Total return (%)............................................ 26.77(b) (10.19)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 179 $ 321
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 1.96 1.75
Without expense reimbursement (%)......................... 2.56 2.11
Ratio of net investment income to average net assets
(%)(a).................................................... .31 .59
Portfolio turnover rate (%)................................. 50 17(d)
</TABLE>
(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
40
<PAGE> 101
<TABLE>
<CAPTION>
IVY GLOBAL NATURAL RESOURCES FUND for the period
April 18, 1999
(commencement)
to December 31,
1999
SELECTED PER SHARE DATA ---------------
<S> <C>
Net asset value, beginning of period........................ $ 7.00
---------------
Income from investment operations
Net investment income(a)(b)............................... .02
Net gains on securities (both realized and
unrealized)(b).......................................... 1.88
---------------
Total from investment operations.......................... 1.90
---------------
Net asset value, end of period.............................. $ 8.90
===============
Total return (%)(c)......................................... 27.14
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 26
Ratio of expenses to average net assets(d)
With expense reimbursement (%)............................ 1.87
Without expense reimbursement (%)......................... 4.24
Ratio of net investment income to average net assets
(%)(a)(d)................................................. .31
Portfolio turnover rate (%)................................. 157
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager.
(b) Based on average shares outstanding
(c) Total return represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
41
<PAGE> 102
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY GLOBAL SCIENCE & for the period
for the year April 15, 1998
ended (commencement)
TECHNOLOGY FUND December 31, to December 31,
SELECTED PER SHARE DATA 1999 1998
------------ ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $23.62 $ 20.19
------------ ----------------
Income from investment operations
Net investment loss....................................... (.24) (.20)(a)
Net gain on securities (both realized and unrealized)..... 29.07 3.63(a)
------------ ----------------
Total from investment operations.......................... 28.83 3.43
------------ ----------------
Less distributions
Distributions from capital gains.......................... 3.63 --
------------ ----------------
Total distributions..................................... 3.63 --
------------ ----------------
Net asset value, end of period.............................. $48.82 $ 23.62
============ ================
Total return (%)............................................ 122.56(b) 16.99(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 431 $ 15
Ratio of expenses to average net assets(%).................. 1.89 2.18(d)
Ratio of net investment loss to average net assets (%)...... (1.71) (1.91)(d)
Portfolio turnover rate (%)................................. 62 73
</TABLE>
(a) Based on average shares outstanding.
(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
42
<PAGE> 103
<TABLE>
<CAPTION>
IVY INTERNATIONAL FUND II for the period
for the year February 23, 1998
ended (commencement)
December 31, to December 31,
1999 1998
SELECTED PER SHARE DATA ------------ ----------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 9.48 $ 9.63
------------ ----------------
Income (loss) from investment operations
Net investment income (a)................................. .04 .11
Net gains or losses on securities (both realized and
unrealized)............................................. 2.64 (.13)
------------ ----------------
Total from investment operations.......................... 2.68 (.02)
------------ ----------------
Less distributions
Dividends from net investment income...................... .10 .11
Distributions from capital gains.......................... .07 .02
------------ ----------------
Total distributions..................................... .17 .13
------------ ----------------
Net asset value, end of period.............................. $11.99 $ 9.48
============ ================
Total return (%)............................................ 28.30(b) (.15)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,748 $ 510
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.38 1.32(d)
Without expense reimbursement (%)......................... 1.53 1.45(d)
Ratio of net investment income to average net assets
(%)(a).................................................... 1.25 1.23(d)
Portfolio turnover rate (%)................................. 21 16
</TABLE>
(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
43
<PAGE> 104
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY INTERNATIONAL SMALL COMPANIES FUND for the period
July 1, 1999
(commencement)
to December 31,
1999
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $ 9.94
----------------
Income from investment operations
Net investment income(a).................................. --
Net gains on securities (both realized and unrealized).... 2.57
----------------
Total from investment operations.......................... 2.57
----------------
Less distributions
Distributions from capital gains.......................... .03
----------------
Total distributions..................................... .03
----------------
Net asset value, end of period.............................. $ 12.48
================
Total return (%)(b)......................................... 25.87
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 291
Ratio of expenses to average net assets(c)(d)
With expense reimbursement (%)............................ 1.83
Without expense reimbursement (%)......................... 8.06
Ratio of net investment income to average net assets
(%)(a)(d)................................................. .03
Portfolio turnover rate (%)................................. 98
</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
44
<PAGE> 105
<TABLE>
<CAPTION>
IVY PAN-EUROPE FUND for the period
March 23, 1998
for the year ended (commencement)
December 31, to December 31,
1999 1998
SELECTED PER SHARE DATA ------------------- ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $11.28 $ 12.31
------------------- ---------------
Income (loss) from investment operations
Net investment income (loss) (a).......................... .03 (.01)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.05 (1.02)(b)
------------------- ---------------
Total from investment operations.......................... 2.08 (1.03)
------------------- ---------------
Less distributions
Dividends from net investment income...................... .02 --
Distributions from capital gains.......................... .75 --
------------------- ---------------
Total distributions..................................... .77 --
------------------- ---------------
Net asset value, end of period.............................. $12.59 $ 11.28
=================== ===============
Total return (%)............................................ 18.50(c) (8.37)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 444 $ 65
Ratio of expenses to average net assets (e)
With expense reimbursement (%)............................ 2.03 2.41(f)
Without expense reimbursement (%)......................... 4.31 5.78(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .62 (.04)(f)
Portfolio turnover rate (%)................................. 30 25
</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) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(f) Annualized
45
<PAGE> 106
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY SOUTH AMERICA FUND for the period
July 1, 1999
(commencement)
to December 31,
1999
SELECTED PER SHARE DATA ---------------
<S> <C>
Net asset value, beginning of period........................ $ 6.60
---------------
Income from investment operations
Net investment income(a).................................. .04
Net gains on securities (both realized and unrealized).... 1.55
---------------
Total from investment operations.......................... 1.59
---------------
Less distributions
Dividends from net investment income...................... .39
---------------
Total distributions..................................... .39
---------------
Net asset value, end of period.............................. $ 7.80
===============
Total return (%)(b)......................................... 24.35
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 163
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 1.43
Without expense reimbursement (%)......................... 7.48
Ratio of net investment income (loss) to average net assets
(%)(a)(c)................................................. 2.21
Portfolio turnover rate (%)................................. 3
</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
46
<PAGE> 107
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
47
<PAGE> 108
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
48
<PAGE> 109
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):
<TABLE>
<S> <C>
$ _______________ Ivy Asia Pacific Fund $ _______________ Ivy Global Science & Technology Fund
$ _______________ Ivy China Region Fund $ _______________ Ivy International Fund II
$ _______________ Ivy Developing Markets Fund $ _______________ Ivy International Small Companies Fund
$ _______________ Ivy European Opportunities Fund $ _______________ Ivy Pan-Europe Fund
$ _______________ Ivy Global Fund $ _______________ Ivy South America Fund
$ _______________ Ivy Global Natural Resources Fund
</TABLE>
B. FOR DEALER USE ONLY
Confirmed trade orders: _____________ ________________ __________
Confirm Number Number of Shares Trade Date
<PAGE> 110
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> 111
- --------------------------------------------------------------------------------
- -- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Asia Pacific Fund Advisor Class IAPVX 465897312
Ivy China Region Fund Advisor Class ICRVX 465897270
Ivy Developing Markets Fund Advisor Class IVCVX 465897163
Ivy European Opportunities Fund Advisor Class IEOVX 465898856
Ivy Global Fund Advisor Class IVGVX 465897239
Ivy Global Natural Resources Fund Advisor Class IGNVX 465897221
Ivy Global Science & Technology Fund Advisor Class IVTVX 465897213
Ivy International Fund II Advisor Class IVIVX 465897197
Ivy International Small Companies Fund Advisor Class IVSVX 465897189
Ivy Pan-Europe Fund Advisor Class IPEVX 465897155
Ivy South America Fund Advisor Class IVSVX 465897171
-------------------------------------------------------------------------------------------------------
* Symbol not assigned as of this printing
</TABLE>
<PAGE> 112
(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
1, 2000 (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, Ste. 300
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 1-202-942-8090 for
further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01INTLADV0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
<PAGE> 113
[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 1, 2000 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 twenty-one
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 principal investment
strategies and risks
11 Management
12 Shareholder information
18 Financial highlights
25 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts AUDITORS
CUSTODIAN PricewaterhouseCoopers LLP
Brown Brothers Harriman & Co. Fort Lauderdale, Florida
Boston, Massachusetts INVESTMENT MANAGER
TRANSFER AGENT Ivy Management, Inc.
Ivy Mackenzie Services Corp. 700 South Federal Highway, Ste.
PO Box 3022 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[Mackenzie Logo]
<PAGE> 114
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
(GLOBE ARTWORK)
2
IVY GROWTH 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 equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
of any size.
The Fund's portfolio is divided into two segments, each of which is managed
according to the investment style of its portfolio manager (such as growth or
value). Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
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 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.
<PAGE> 115
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 12, 1960 compare with those of a broad
measure of market performance. The Fund's past performance is not
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES(1) December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 22.79%
Worst quarter Q3 '98: (17.04%)
*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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------------------
S&P 500
CLASS A CLASS B CLASS C INDEX
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year....................... 24.28% 25.63% 29.43% 21.10%
Past 5 years.................... 18.77% 18.85% n/a 28.97%
Past 10 years................... 13.05% n/a n/a 18.38%
Since inception:
Class B(2)...................... -- 14.80% -- 23.36%
Class C(2)...................... -- -- 15.74% 27.27%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) 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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested
dividends............. none none none
Redemption fee(2)..... none none none
Exchange fee.......... none none none
</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(3).... 0.85% 0.85% 0.85%
Distribution and/or
service (12b-1)
fees.................. 0.25% 1.00% 1.00%
Other expenses........ 0.28% 0.49% 0.62%
Total annual Fund
operating expenses.... 1.38% 2.34% 2.47%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) 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 $ 737 $ 237 $ 350 $ 250
3rd 987 1,030 730 770 770
5th 1,287 1,450 1,250 1,316 1,316
10th 2,137 2,436 2,436 2,806 2,806
</TABLE>
<PAGE> 116
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
4
(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
(including common stock, preferred stock and securities convertible into common
stock), a number of which pay dividends.
The Fund's manager uses a growth strategy of investing.
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: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
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 compare with those of a
broad-based index and other indexes that reflect the market sectors in which the
Fund invests. The Fund's past performance is not necessarily an indication of
how the Fund will perform in the future.
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
- -----------------------------------------------------
(CHART)
Best quarter Q4 '98: 17.92%
Worst quarter Q3 '98: (15.69%)
* 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
- --------------------------------------------------------------------------
LIPPER
S&P S&P AVERAGE
CLASS CLASS CLASS 500 400 GROWTH AND
A B C INDEX INDEX INCOME FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Past year............ 4.60% 5.14% 8.91% 21.10% 14.72% 13.77%
Past 5 years......... 16.02% 16.31% n/a 28.97% 23.04% 21.34%
Past 10 years........ 12.71% n/a n/a 18.38% 17.31% 14.43%
Since inception(2):
Class B(3)........... -- 12.72% -- 23.36% 18.04% 16.92%
Class C(4)........... -- -- 14.18% 27.27% 20.29% 18.27%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) Unless otherwise noted, Index performance is calculated by reference to each
class's inception date.
(3) The inception date for the Fund's Class B shares was October 22, 1993. S&P
400 Index performance is calculated from October 31, 1993.
(4) The inception date for the Fund's Class C shares was April 30, 1996.
<PAGE> 117
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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>
<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............ 0.62% 0.61% 0.75%
Total annual Fund
operating expenses........ 1.62% 2.36% 2.50%
</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.
**If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
- -------------------------------------------------------------------------
-- 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 $ 730 $ 739 $ 239 $ 353 $ 253
3rd 1,057 1,036 736 779 779
5th 1,406 1,460 1,260 1,331 1,331
10th 2,386 2,512 2,512 2,836 2,836
</TABLE>
<PAGE> 118
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
6
(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 equity securities (including common stock,
preferred stock and securities convertible into common stock) 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 Fund's manager uses an equity style that focuses on both growth and value.
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
<PAGE> 119
7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the Fund
for the first full calendar year since its commencement on November 2, 1998
with a broad measure of market performance. The Fund's past performance is
not necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
------------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 12.62%
Worst quarter Q3 '99: (6.94%)
*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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
------------------------------------------------------------------------
S&P
CLASS A CLASS B CLASS C CLASS I(2) 500 INDEX
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 8.71% 9.74% 13.84% n/a 21.10%
Since inception(3)... 14.29% 13.28% 16.76% n/a 28.47%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The Fund had no Class I shares outstanding.
(3) The inception date for Class A was November 2, 1998. The inception date
for Class B and Class C was November 6, 1998. Index performance is
calculated from October 31, 1998.
-- 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 original
purchase price).......... none(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none none
Redemption fee(2)........ none none none none
Exchange fee............. none none none none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I(3)
- -----------------------------------------------------------------
<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......... 2.49% 2.43% 2.36% 2.40%
Total annual Fund
operating expenses..... 3.49% 4.18% 4.11% 3.15%
Expenses
reimbursed(4).......... 1.84% 1.84% 1.84% 1.84%
Net Fund operating
expenses(4)............ 1.65% 2.34% 2.27% 1.31%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
(3) The Fund has no Class I shares outstanding. Percentages shown are estimates
based on expenses for Class A shares.
(4) The Fund's Investment Manager has contractually agreed to reimburse the
Fund's expenses for the current fiscal year ending December 31, 2000 to the
extent necessary to ensure that the Fund's Annual Fund Operating Expenses,
when calculated at the Fund level, do not exceed 1.34% of the Fund's average
net assets (excluding Rule 12b-1 fees and certain other expenses). 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. The expense
information shown above has been restated to reflect current fees.
- -------------------------------------------------------------------------
-- 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 $ 733 $ 737 $ 237 $ 330 $ 230 $ 133
3rd 1,293 1,267 967 946 946 659
5th 1,877 1,918 1,718 1,684 1,684 1,211
10th 3,453 3,542 3,542 3,635 3,635 2,718
</TABLE>
<PAGE> 120
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
8
(GLOBE ARTWORK)
IVY US EMERGING
GROWTH FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities (including
common stock, preferred stock and securities convertible into common stock) 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.
The Fund's manager uses a growth strategy of investing.
Companies typically are selected from within the technology, heath care,
entertainment, and business and consumer services sectors, and may include
companies engaged in initial public offerings.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
- -- 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 (see next page) 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
compare with those of a broad measure of market performance. The Fund's past
performance is not necessarily an indication of how the Fund will perform in the
future.
<PAGE> 121
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
------------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 51.31%
Worst quarter Q3 '98: (17.82%)
*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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
--------------------------------------------------------------
RUSSELL
2000
GROWTH
CLASS A CLASS B CLASS C INDEX
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............. 53.13% 56.27% 60.32% 43.09%
Past 5 years.......... 25.97% 26.39% n/a 18.99%
Since inception:
Class A(2)............ 26.36% -- -- 16.53%
Class B(3)............ -- 21.40% -- 14.58%
Class C(4)............ -- -- 18.60% 13.64%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) 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.) Index performance is
calculated from April 30, 1993.
(3) The inception date for the Fund's Class B shares was October 22, 1993.
Index performance is calculated from October 31, 1993.
(4) The inception date for the Fund's Class C shares was April 30, 1996.
Index performance is calculated accordingly.
- -- 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(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends...... none none none
Redemption fee(2)......... none none none
Exchange fee.............. none none none
</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............ 0.59% 0.58% 0.54%
Total annual Fund
operating expenses........ 1.69% 2.43% 2.39%
</TABLE>
(1) A CDSC of 1.00% may apply to Class A share that are redeemed
within two years of the end of the month in which they were purchased.
(2) If you choose to receive your redemption proceeds via Federal Funds wire,
a $10 wire fee will be charged to your account.
- -------------------------------------------------------------------------
-- 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 $ 737 $ 746 $ 246 $ 342 $ 242
3rd 1,077 1,058 758 745 745
5th 1,440 1,496 1,296 1,275 1,275
10th 2,458 2,583 2,583 2,726 2,726
</TABLE>
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US EQUITY FUNDS
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10
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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. Approximately one
half 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. The other half of the Fund's portfolio is
invested in equity securities of small- and medium-sized U.S. companies that are
in the early stages of their life cycles and that are believed to have the
potential to increase their sales and earnings at above average rates.
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.
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), 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. Investment in
debt securities also involves both interest rate and credit risk.
- -- 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
<PAGE> 123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption or
exchange.
OTHER RISKS: Following is a description of the general risk characteristics of
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 the Fund's returns). The
risks of certain portfolio management practices that are not principal
strategies of the Funds (such as borrowing) are also described below. 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).
RISK CHARACTERISTICS:
- - EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller-company
securities may also be higher than those of larger companies. Investors in Ivy
US Emerging Growth Fund should note that these risks are heightened in the
case of securities issued through IPOs.
- - 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.
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other seventeen series of
Ivy Fund. For the fiscal year ended December 31, 1999, the 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%;
- - Ivy US Blue Chip Fund, 0.75%; and
- - Ivy US Emerging Growth Fund, 0.85%.
- -- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into two different segments,
which are managed by the following individuals:
- - James W. Broadfoot, President of IMI and 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 26 years of professional investment
experience, holds an MBA from the Wharton School of Business and is a
Chartered Financial Analyst.
- - 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
25 years of professional investment experience and is a Chartered Financial
Analyst. He has an MBA from Wayne State University.
IVY GROWTH WITH INCOME FUND AND IVY US BLUE CHIP FUND: Both Funds are 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).
<PAGE> 124
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US EQUITY FUNDS
- --------------------------------------------------------------------------------
12
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 quoted sale price on the exchange on which it
is principally traded.
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, 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").
- -- HOW TO BUY SHARES
Please read these sections below carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
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.
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.
<PAGE> 125
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
- -- 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. A CDSC of 1.00% may apply to shares redeemed
within two years of the end of the month in which they were purchased. 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 those that employ a registered representative who during a
specified time period sells a minimum dollar amount of the shares of a Fund
and/or other funds distributed by IMDI.
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 IMDI.
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 two years after purchase.
With respect solely to Ivy US Emerging Growth Fund, former Class N shareholders
of Hudson Capital Appreciation Fund are exempt from the initial sales charge on
the Fund's Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C shares are not subject to an
initial sales charge but are subject to a CDSC. If you redeem your Class C
shares within one year of purchase they will be subject to a CDSC of 1%, and
Class B shares
<PAGE> 126
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US EQUITY FUNDS
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14
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 reinvested dividends or
distributions, or on shares held over six years. If your shares have appreciated
in value, each share redeemed will include both your original cost (subject to
the above CDSC schedule) and any proportional increase in market value (not
subject to a CDSC). If your shares have depreciated in value, the CDSC will be
assessed on the market value of the shares being redeemed. At the time of
redemption, the calculation is performed on a share-by-share basis as described
below.
Shares will be redeemed 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 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 12 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., Ste. 300
Boca Raton, FL 33432-6114
<PAGE> 127
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15
- -- 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 on page 14.
- - 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
transmitting redemption orders in proper form and 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.
- - 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.
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16
- - 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.
- - 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 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. 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
<PAGE> 129
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17
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. While the Funds' managers may at
times pursue strategies that result in tax efficient outcomes for Fund
shareholders, they do not generally manage the Funds to optimize tax
efficiencies.
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.
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.
<PAGE> 130
18
[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.
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 each Fund's Annual Report to
shareholders (which is available upon request).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------
IVY GROWTH FUND for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
-------------------------------------------------------------------------
Income from investment operations
Net investment (loss) income..................... (.32) .01 .02 .02(a) .05(a)
Net gains on securities (both realized and
unrealized).................................... 6.61 2.49 1.98 2.86 3.73
-------------------------------------------------------------------------
Total from investment operations................. 6.29 2.50 2.00 2.88 3.78
-------------------------------------------------------------------------
Less distributions
Dividends
From net investment income..................... -- .02 .02 .02 .02
In excess of net investment income............. -- -- .13 .11 --
Distributions
From capital gains............................. 4.02 .40 1.81 1.74 .89
In excess of capital gains..................... -- -- -- -- .03
-------------------------------------------------------------------------
Total distributions............................ 4.02 .42 1.96 1.87 .94
-------------------------------------------------------------------------
Net asset value, end of period..................... $ 22.15 $ 19.88 $ 17.80 $ 17.76 $ 16.75
=========================================================================
Total return (%)(b)................................ 31.87 14.05 11.69 17.22 27.33
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $363,723 $318,444 $320,000 $314,908 $289,954
Ratio of expenses to average net assets
With expense reimbursement (%)................... -- -- -- 1.45 1.59
Without expense reimbursement (%)................ 1.38 1.38 1.38 1.45 1.60
Ratio of net investment (loss) income to average
net assets (%)................................... (.13) .03 .13 .13(a) .32(a)
Portfolio turnover rate (%)........................ 51 59 39 72 41
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------------
for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91
-------------------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.21) (.16) (.14) (.13)(a) (.08)(a)
Net gains on securities (both realized and
unrealized).................................... 6.17 2.46 1.96 2.81 3.71
-------------------------------------------------------------------------
Total from investment operations................. 5.96 2.30 1.82 2.68 3.63
-------------------------------------------------------------------------
Less distributions
Dividends
From net investment income..................... -- .02 -- -- --
In excess of net investment income............. -- -- .07 -- --
Distributions
From capital gains............................. 3.84 .40 1.72 1.74 .73
In excess of capital gains..................... -- -- -- -- .06
-------------------------------------------------------------------------
Total distributions............................ 3.84 .42 1.79 1.74 .79
-------------------------------------------------------------------------
Net asset value, end of period..................... $ 21.72 $ 19.60 $ 17.72 $ 17.69 $ 16.75
=========================================================================
Total return (%)(b)................................ 30.63 12.99 10.69 16.02 26.13
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 8,070 $ 4,889 $ 4,433 $ 3,850 $ 2,699
Ratio of expenses to average net assets
With expense reimbursement (%)................... -- -- -- 2.37 2.55
Without expense reimbursement (%)................ 2.34 2.32 2.30 2.37 2.56
Ratio of net investment loss to average net assets
(%).............................................. (1.09) (.90) (.79) (.79)(a) (.64)(a)
Portfolio turnover rate (%)........................ 51 59 39 72 41
</TABLE>
<PAGE> 131
19
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CLASS C
IVY GROWTH FUND -----------------------------------------------------
for the period
April 30, 1996
for the years (commencement)
ended December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $19.27 $17.47 $17.59 $18.46
----------------------------------------------------
Income from investment operations
Net investment loss....................................... (.25) (.16) (.07) (.06)(a)
Net gains on securities (both realized and unrealized).... 6.08 2.38 1.86 1.02
----------------------------------------------------
Total from investment operations.......................... 5.83 2.22 1.79 .96
----------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- .02 -- --
In excess of net investment income...................... -- -- .13 .09
Distributions from capital gains.......................... 3.82 .40 1.78 1.74
----------------------------------------------------
Total distributions..................................... 3.82 .42 1.91 1.83
----------------------------------------------------
Net asset value, end of period.............................. $21.28 $19.27 $17.47 $17.59
====================================================
Total return (%)............................................ 30.43 12.72(b) 10.58(b) 5.20(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 576 $ 263 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement (%)............................ -- -- -- 2.44(d)
Without expense reimbursement (%)......................... 2.47 2.53 2.33 2.44(d)
Ratio of net investment loss to average net assets (%)...... (1.22) (1.11) (.82) (.86)(a)(d)
Portfolio turnover rate (%)................................. 51 59 39 72
</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 represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
<PAGE> 132
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 13.54 $ 12.59 $ 11.38 $ 10.98 $ 9.08
--------------------------------------------------------------
Income from investment operations
Net investment (loss) income....................... (.03) .04 .08 .08 .11
Net gains on securities (both realized and
unrealized)...................................... 1.51 1.19 2.37 2.16 2.13
--------------------------------------------------------------
Total from investment operations................... 1.48 1.23 2.45 2.24 2.24
--------------------------------------------------------------
Less distributions
Dividends
From net investment income....................... -- -- .03 .08 .08
In excess of net investment income............... .03 -- -- .03 --
Distributions from capital gains................... 1.48 .28 1.21 1.73 .26
--------------------------------------------------------------
Total distributions.............................. 1.51 .28 1.24 1.84 .34
--------------------------------------------------------------
Net asset value, end of period....................... $ 13.51 $ 13.54 $ 12.59 $ 11.38 $ 10.98
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%)(a).................................. 10.98 9.64 21.57 20.46 24.93
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 63,580 $ 69,733 $ 69,742 $ 63,219 $ 59,054
Ratio of expenses to average net assets (%).......... 1.62 1.60 1.59 1.81 1.96
Ratio of net investment (loss) income to average net
assets (%)......................................... (.23) .28 .58 .68 1.06
Portfolio turnover rate (%).......................... 82 108 36 138 81
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------
for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 13.38 $ 12.54 $ 11.36 $ 10.98 $ 9.08
--------------------------------------------------------------
Income from investment operations
Net investment (loss) income....................... (.13) (.06) (.02) (.01) .03
Net gains on securities (both realized and
unrealized)...................................... 1.48 1.18 2.37 2.15 2.13
--------------------------------------------------------------
Total from investment operations................... 1.35 1.12 2.35 2.14 2.16
--------------------------------------------------------------
Less distributions
Dividends
From net investment income....................... -- -- .03 -- .01
In excess of net investment income............... .03 -- -- .08 --
Distributions from capital gains................... 1.48 .28 1.14 1.68 .25
--------------------------------------------------------------
Total distributions.............................. 1.51 .28 1.17 1.76 .26
--------------------------------------------------------------
Net asset value, end of period....................... $ 13.22 $ 13.38 $ 12.54 $ 11.36 $ 10.98
--------------------------------------------------------------
--------------------------------------------------------------
Total return (%)(a).................................. 10.14 9.01 20.74 19.59 23.94
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 21,750 $ 23,975 $ 20,071 $ 13,473 $ 8,868
Ratio of expenses to average net assets (%).......... 2.36 2.33 2.31 2.55 2.75
Ratio of net investment (loss) income to average net
assets (%)......................................... (.97) (.45) (.13) (.06) .27
Portfolio turnover rate (%).......................... 82 108 36 138 81
</TABLE>
20
<PAGE> 133
21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CLASS C
IVY GROWTH WITH INCOME FUND -------------------------------------------------
for the period
April 30, 1996
for the years (commencement)
ended December 31, to December 31,
- -----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $13.29 $12.44 $11.37 $11.73
------------------------------------------------
Income from investment operations
Net investment loss....................................... (.14) (.05) (.01) (.08)
Net gains on securities (both realized and unrealized).... 1.45 1.18 2.35 1.53
------------------------------------------------
Total from investment operations.......................... 1.31 1.13 2.34 1.45
------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- -- --
In excess of net investment income...................... .03 -- -- .08
Distributions from capital gains.......................... 1.48 .28 1.27 1.73
------------------------------------------------
Total distributions..................................... 1.51 .28 1.27 1.81
------------------------------------------------
Net asset value, end of period.............................. $13.09 $13.29 $12.44 $11.37
================================================
Total return (%)............................................ 9.91(a) 9.16(a) 20.70(a) 12.37(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 484 $ 643 $4,356 $ 28
Ratio of expenses to average net assets (%)................. 2.50 2.27 2.23 3.02(c)
Ratio of net investment loss to average net assets (%)...... (1.11) (.39) (.05) (.53)(c)
Portfolio turnover rate (%)................................. 82 108 36 138
</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
<PAGE> 134
22
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
IVY US BLUE CLASS A CLASS B CLASS C
CHIP FUND for the period for the period for the period
for the year November 2, 1998 for the year November 6, 1998 for the year November 6, 1998
ended (commencement) ended (commencement) ended (commencement)
December 31, to December 31, December 31, to December 31, December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1999 1998 1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............... $10.74 $10.00 $10.72 $10.30 $10.72 $10.30
-------------------------------------------------------------------------------------------------
Income from investment
operations
Net investment loss
(a)................... (.01) --(b) (.07) (.01)(b) (.07) (.01)(b)
Net gains on securities
(both realized and
unrealized)........... 1.66 .74(b) 1.65 .43(b) 1.66 .43(b)
-------------------------------------------------------------------------------------------------
Total from investment
operations............ 1.65 .74 1.58 .42 1.59 .42
-------------------------------------------------------------------------------------------------
Less distributions
Dividends from net
investment income..... .07 -- .01 -- .01 --
-------------------------------------------------------------------------------------------------
Total distributions... .07 -- .01 -- .01 --
-------------------------------------------------------------------------------------------------
Net asset value, end of
period.................. $12.32 $10.74 $12.29 $10.72 $12.30 $10.72
=================================================================================================
Total return (%).......... 15.35(c) 7.40(d) 14.74(c) 4.08(d) 14.84(c) 4.08(d)
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
(in thousands).......... $3,353 $ 726 $8,742 $1,047 $2,497 $ 110
Ratio of expenses to
average net assets (%)
With expense
reimbursement (%)..... 1.46 1.43(e) 2.15 2.13(e) 2.08 2.22(e)
Without expense
reimbursement (%)..... 3.49 6.34(e) 4.18 7.04(e) 4.11 7.13(e)
Ratio of net investment
loss to average net
assets (%)(a)........... (.12) .02(e) (.81) (.68)(e) (.74) (.77)(e)
Portfolio turnover rate
(%)..................... 80 3 80 3 80 3
</TABLE>
(a) Net investment loss is net of expenses reimbursed by Manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Annualized
<PAGE> 135
23
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
-------------------------------------------------------------------------
Income from investment operations
Net investment loss............................... (.49) (.44)(a) (.41)(a) (.35) (.24)
Net gains on securities (both realized and
unrealized)..................................... 20.70 5.42(a) 1.54(a) 4.84 7.90
-------------------------------------------------------------------------
Total from investment operations.................. 20.21 4.98 1.13 4.49 7.66
-------------------------------------------------------------------------
Less distributions
Distributions from capital gains.................. 5.57 -- -- 2.07 1.92
-------------------------------------------------------------------------
Total distributions............................... 5.57 -- -- 2.07 1.92
-------------------------------------------------------------------------
Net asset value, end of period...................... $ 47.29 $ 32.65 $ 27.67 $ 26.54 $ 24.12
=========================================================================
Total return (%)(b)................................. 62.47 18.00 4.26 18.52 42.07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $101,798 $62,961 $64,910 $55,944 $39,456
Ratio of expenses to average net assets (%)......... 1.69 1.70 1.67 1.76 1.95
Ratio of net investment loss to average net assets
(%)............................................... (1.53) (1.48) (1.37) (1.31) (1.39)
Portfolio turnover rate (%)......................... 107 67 65 68 86
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
-------------------------------------------------------------------------
for the years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38
-------------------------------------------------------------------------
Income from investment operations
Net investment loss............................... (.77) (.65)(a) (.33)(a) (.40) (.35)
Net gains on securities (both realized and
unrealized)..................................... 20.15 5.32(a) 1.26(a) 4.68 7.85
-------------------------------------------------------------------------
Total from investment operations.................. 19.38 4.67 .93 4.28 7.50
-------------------------------------------------------------------------
Less distributions
Distributions from capital gains.................. 5.30 -- -- 2.07 1.76
-------------------------------------------------------------------------
Total distributions............................... 5.30 -- -- 2.07 1.76
-------------------------------------------------------------------------
Net asset value, end of period...................... $ 46.01 $ 31.93 $ 27.26 $ 26.33 $ 24.12
=========================================================================
Total return (%)(b)................................. 61.27 17.13 3.53 17.65 41.03
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 79,659 $52,940 $47,789 $35,321 $13,985
Ratio of expenses to average net assets (%)......... 2.43 2.45 2.43 2.52 2.70
Ratio of net investment loss to average net assets
(%)............................................... (2.27) (2.23) (2.13) (2.07) (2.14)
Portfolio turnover rate (%)......................... 107 67 65 68 86
</TABLE>
<PAGE> 136
24
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CLASS C
IVY US EMERGING GROWTH FUND ----------------------------------------------------
for the period
April 30, 1996
for the years (commencement)
ended December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 31.91 $27.23 $26.29 $29.69
---------------------------------------------------
Income (loss) from investment operations
Net investment loss....................................... (.80) (.63)(a) (.34)(a) (.14)
Net gains or losses on securities (both realized and
unrealized)............................................. 20.19 5.31(a) 1.28(a) (1.19)
---------------------------------------------------
Total from investment operations.......................... 19.39 4.68 .94 (1.33)
---------------------------------------------------
Less distributions
Distributions from capital gains.......................... 5.32 -- -- 2.07
---------------------------------------------------
Total distributions....................................... 5.32 -- -- 2.07
---------------------------------------------------
Net asset value, end of period.............................. $ 45.98 $31.91 $27.23 $26.29
===================================================
Total return (%)............................................ 61.32(b) 17.19(b) 3.58(b) (4.48)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $15,438 $9,664 $9,484 $4,018
Ratio of expenses to average net assets (%)................. 2.39 2.40 2.39 2.52(d)
Ratio of net investment loss to average net assets (%)...... (2.23) (2.18) (2.09) (2.07)(d)
Portfolio turnover rate (%)................................. 107 67 65 68
</TABLE>
(a) Based on average shares outstanding.
(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
<PAGE> 137
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.
REGISTRATION
1
- --
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>
TAX I.D.
2
- --
<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.)
DEALER INFORMATION
3
- --
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 -----------------------------------------------------------------
INVESTMENTS
4
- --
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 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.
<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
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: ------------------ ------------------ ------------------
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 138
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
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 139
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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> 140
[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
1, 2000 (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
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, Ste. 300
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 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IUSXX0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
<PAGE> 141
[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 1, 2000 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
twenty-one 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 principal investment
strategies and risks
11 Management
12 Shareholder information
16 Financial highlights
21 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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, Ste. 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[MACKENZIE LOGO]
<PAGE> 142
[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 primarily in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
of any size.
The Fund's portfolio is divided into two segments, each of which is managed
according to the investment style of its portfolio manager (such as growth or
value). Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
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 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> 143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on April 30, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 22.78%
Worst quarter Q3 '99: (0.93%)
* Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR S&P 500
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year............................ 31.78% 21.10%
Since Inception*..................... 17.86% 20.13%
</TABLE>
*The inception date for Advisor Class shares was April 30, 1998.
- -- 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>
<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............................. 0.57%
Total annual Fund
operating expenses......................... 1.42%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**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 $ 145
3rd 449
5th 776
10th 1,702
</TABLE>
3
<PAGE> 144
[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
(including common stock, preferred stock and securities convertible into common
stock), a number of which pay dividends.
The Fund's manager uses a growth strategy of investing.
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: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
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 gives some indication of the
risks of investing in the Fund by comparing the performance of the Fund's
Advisor Class shares for the first full calendar year since its commencement on
April 30, 1998 with a broad-based index and other indexes that reflect the
market sectors in which the Fund invests. The Fund's past performance is not
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
- --------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q2 '99: 9.83%
Worst quarter Q3 '99: (4.69%)
*Any applicable account fees are not reflected, and if they were the returns
shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
- -----------------------------------------------------
LIPPER AVERAGE
ADVISOR S&P 500 S&P 400 GROWTH AND
CLASS INDEX INDEX INCOME FUND
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............ 11.18% 21.10% 14.72% 13.77%
Since Inception*..... 6.31% 20.27% 20.13% 12.05%
</TABLE>
*The inception date for Advisor Class shares was April 30, 1998.
4
<PAGE> 145
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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>
<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............................. 0.71%
Total annual Fund
operating expenses......................... 1.46%
</TABLE>
*If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
- --------------------------------------------------------------------------------
-- 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 $ 149
3rd 462
5th 797
10th 1,746
</TABLE>
5
<PAGE> 146
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
(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 equity securities (including common stock,
preferred stock and securities convertible into common stock) 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 Fund's manager uses an equity style that focuses on both growth and value.
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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> 147
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on November 2, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 12.64%
Worst quarter Q3 '99: (6.83%)
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR S&P 500
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year............................. 15.89% 21.10%
Since Inception*...................... 20.95% 28.47%
</TABLE>
*The inception date for Advisor Class shares was November 2, 1998. Index
performance is calculated from October 31, 1998.
- -- 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>
<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............................. 2.38%
Total annual Fund
operating expenses......................... 3.13%
Expenses reimbursed**...................... 1.84%
Net Fund operating expenses**.............. 1.29%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, to the extent necessary to ensure that the
Fund's Annual Fund Operating Expenses, when calculated at the Fund
level, do not exceed 1.34% of the Fund's average net assets
(excluding Rule 12b-1 fees and certain other expenses). 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. The expense information shown above has been restated to
reflect current fees.
- -------------------------------------------------------------------------
-- 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 $ 131
3rd 653
5th 1,201
10th 2,698
</TABLE>
7
<PAGE> 148
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
(Globe)
IVY US EMERGING
GROWTH FUND
- -- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
- -- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities (including
common stock, preferred stock and securities convertible into common stock) 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.
The Fund's manager uses a growth strategy of investing.
Companies typically are selected from within the technology, health care,
entertainment, and business and consumer services sectors, and may include
companies engaged in initial public offerings.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's 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.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
- -- 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> 149
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on February 18, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 51.40%
Worst quarter Q1 '99: (5.58%)
* Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR RUSSELL 2000
CLASS GROWTH INDEX
-----------------------------------------------------------
<S> <C> <C>
Past year.......................... 62.85% 43.09%
Since inception*................... 39.17% 17.77%
</TABLE>
* The Inception date for Advisor Class shares was February 18, 1998. Index
performance is calculated from February 28, 1998.
- -- 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>
<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............................. 0.61%
Total annual Fund
operating expenses......................... 1.46%
</TABLE>
* If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
- -------------------------------------------------------------------------
-- 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 $ 149
3rd 462
5th 797
10th 1,746
</TABLE>
9
<PAGE> 150
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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. Approximately one
half 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. The other half of the Fund's portfolio is
invested in equity securities of small- and medium-sized U.S. companies that are
in the early stages of their life cycles and that are believed to have the
potential to increase their sales and earnings at above average rates.
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.
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), 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.
- -- 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
10
<PAGE> 151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption or
exchange.
OTHER RISKS: Following is a description of the general risk characteristics of
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 the Fund's returns). The
risks of certain portfolio management practices that are not principal
strategies of the Funds (such as borrowing) are also described below. 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).
RISK CHARACTERISTICS:
- - EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller company
securities may also be higher than those of larger companies. Investors in Ivy
US Emerging Growth Fund should note that these risks are heightened in the
case of securities issued through IPOs.
- - 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.
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Fund.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other seventeen series of
Ivy Fund. For the fiscal year ended December 31, 1999, the 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%;
- - Ivy US Blue Chip Fund, 0.75%; and
- - Ivy US Emerging Growth Fund, 0.85%.
- -- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into two different segments,
which are managed by the following individuals:
- - James W. Broadfoot, President of IMI and 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 26 years of professional investment
experience, holds an MBA from the Wharton School of Business and is a
Chartered Financial Analyst.
- - 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
25 years of professional investment experience and is a Chartered Financial
Analyst. He has an MBA from Wayne State University.
IVY GROWTH WITH INCOME FUND AND IVY US BLUE CHIP FUND: Both Funds are 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).
11
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY 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 quoted sale price on the exchange on which it
is principally traded.
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, 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.
- -- 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.
12
<PAGE> 153
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- 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 12 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, Ste. 300
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
transmitting redemption orders in proper form and 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.
- - 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:
13
<PAGE> 154
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
US EQUITY FUNDS
- --------------------------------------------------------------------------------
- - 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.
OTHER 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 "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 13 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.
OTHER 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 dividends annually. The Funds will distribute net
14
<PAGE> 155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. While
the Funds' managers may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
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.
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.
15
<PAGE> 156
[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 each
Fund's Annual Report to shareholders (which is available upon request).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
IVY GROWTH FUND for the period
for the April 30, 1998
year ended (commencement)
December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $19.91 $20.36
------------------------------------
Income (loss) from investment operations
Net investment (loss) income.............................. (.04) .03
Net gains or losses on securities (both realized and
unrealized)............................................. 6.33 (.06)
------------------------------------
Total from investment operations........................ 6.29 (.03)
------------------------------------
Less distributions
Dividends from net investment income...................... -- .02
Distributions from capital gains.......................... 4.02 .40
------------------------------------
Total distributions..................................... 4.02 .42
------------------------------------
Net asset value, end of period.............................. $22.18 $19.91
====================================
Total return (%)............................................ 31.78(a) (.14)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 438 $ 347
Ratio of expenses to average net assets (%)................. 1.42 1.18 (c)
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.17) .24 (c)
Portfolio turnover rate (%)................................. 51 59
</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
16
<PAGE> 157
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND for the period
for the April 30, 1998
year ended (commencement)
December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $13.58 $13.88
------------------------------------
Income (loss) from investment operations
Net investment (loss) income.............................. (.02) .05
Net gains or losses on securities (both realized and
unrealized)............................................. 1.53 (.07)
------------------------------------
Total from investment operations........................ 1.51 (.02)
------------------------------------
Less distributions
Dividends in excess of net investment income.............. .03 --
Distributions from capital gains.......................... 1.48 .28
------------------------------------
Total distributions..................................... 1.51 .28
------------------------------------
Net asset value, end of period.............................. $13.58 $13.58
====================================
Total return (%)............................................ 11.18(a) (.36)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 375 $ 339
Ratio of expenses to average net assets (%)................. 1.46 1.20 (c)
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.07) .68 (c)
Portfolio turnover rate (%)................................. 82 108
</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
17
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[IVY LEAF LOGO]
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY US BLUE CHIP FUND for the period
for the November 2, 1998
year ended (commencement)
December 31, to December 31,
SELECTED PER SHARE DATA 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $10.74 $10.00
------ ------
Income from investment operations
Net investment income(a).................................. .02 .01(b)
Net gains on securities (both realized and unrealized).... 1.69 .73(b)
------ ------
Total from investment operations........................ 1.71 .74
------ ------
Less distributions
Dividends from net investment income...................... .10 --
------ ------
Total distributions..................................... .10 --
------ ------
Net asset value, end of period.............................. $12.35 $10.74
====== ======
Total return (%)............................................ 15.89(c) 7.40(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 920 $ 537
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.10 1.08(e)
Without expense reimbursement (%)......................... 3.13 5.99(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .24 .37(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
(a) Net investment income is net of expenses reimbursed by
Manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not
reflect a sales charge.
(e) Annualized
18
<PAGE> 159
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND for the period
for the February 18, 1998
year ended (commencement)
December 31, to December 31,
- --------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
--------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $32.79 $28.82
------ ------
Income from investment operations
Net investment loss....................................... (.44) (.23)(a)
Net gains on securities (both realized and unrealized).... 20.85 4.20(a)
------ ------
Total from investment operations........................ 20.41 3.97
------ ------
Less distributions
Distributions from capital gains.......................... 5.63 --
------ ------
Total distributions..................................... 5.63 --
------ ------
Net asset value, end of period.............................. $47.57 $32.79
====== ======
Total return (%)............................................ 62.85(b) 13.78(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,432 $ 740
Ratio of expenses to average net assets(%).................. 1.46 1.22(d)
Ratio of net investment loss to average net assets (%)...... (1.30) (1.00)(d)
Portfolio turnover rate (%)................................. 107 67
</TABLE>
(a) Based on average shares outstanding.
(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
19
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[IVY LEAF LOGO]
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NOTES
- --------------------------------------------------------------------------------
20
<PAGE> 161
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> 162
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> 163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Growth Fund Advisor Class IVYVX 465897254
Ivy Growth with Income Fund Advisor Class IGIVX 465897247
Ivy US Blue Chip Fund Advisor Class * 465898864
Ivy US Emerging Growth Fund Advisor Class IVEVX 465897262
- ----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing
<PAGE> 164
'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
1, 2000 (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
each Fund's 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, Ste. 300
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and each Fund's annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IUSADV0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
<PAGE> 165
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 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 twenty-one 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 prinncipal investment
strategies and risks
11 Management
12 Shareholder information
19 Financial highlights
23 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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, Ste. 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
MACKENZIE LOGO
<PAGE> 166
[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). These securities typically are rated Ba or below by Moody's or BB or
below by S&P (or are judged by the Fund's manager to be of comparable quality).
The Fund may invest a portion of its assets in foreign (including emerging
market) debt securities to diversify its holdings and to increase its potential
return. The Fund may also invest in 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 AND MATURITY 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. You could lose money if you redeem your Fund
shares at a time when interest rates are rising. The risk is more acute for debt
securities with longer maturities.
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 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> 167
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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
compare with those of a broad measure of market performance. The Fund's
past performance is not necessarily an indication of how the Fund will
perform in the future.
<TABLE>
<S> <C>
TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
-------------------------------------------------------------
</TABLE>
[Chart]
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'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
'99 (6.17)
</TABLE>
Best quarter Q4 '90: 7.68%
Worst quarter Q1 '90: (4.52%)
*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.
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MORNINGSTAR
CORPORATE
BOND
GENERAL
CLASS A CLASS B CLASS C CLASS I(2) UNIVERSE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............... (10.63%) (11.63%) (7.75%) n/a (0.63%)
Past 5 years............ 4.87% 4.76% n/a n/a 6.80%
Past 10 years........... 6.13% n/a n/a n/a 7.29%
Since inception:
Class B(3).............. -- 3.87% -- -- 5.85%
Class C(4).............. -- -- 3.07% -- 5.63%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The Fund has had no outstanding Class I shares.
(3) The inception date for Class B was April 1, 1994. Index
performance is calculated accordingly.
(4) The inception date for Class C was April 30, 1996. Morningstar
Corporate Bond General Universe performance is calculated from
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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption fee(2)....... none none none none
Exchange fee............ none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I(3)
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees(4).... 0.75% 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1)
fees.................. 0.25% 1.00% 1.00% none
Other expenses........ 0.52% 0.61% 0.51% 0.43%
Total annual Fund
operating expenses.... 1.52% 2.36% 2.26% 1.18%
</TABLE>
<TABLE>
<C> <S>
(1) 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.
(2) If you choose to receive your redemption proceeds
via Federal Funds wire, a $10 wire fee will be
charged to your account.
(3) The Fund has had no outstanding Class I shares.
Percentages shown are estimates based on expenses
for Class A shares.
(4) Management Fees are reduced to 0.50% for net assets
over $100 million.
</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 $ 622 $ 739 $ 239 $ 329 $ 229 $ 120
3rd 932 1,036 736 706 706 375
5th 1,265 1,460 1,260 1,210 1,210 649
10th 2,201 2,487 2,487 2,595 2,595 1,432
</TABLE>
3
<PAGE> 168
[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 Fund's principal investments usually
include corporate bonds, mortgage or asset backed securities and government
obligations (including sovereign debt). 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).
Low rated debt securities typically are rated Ba or below by Moody's or BB or
below by S&P (or are judged by the Fund's manager to be of comparable quality).
The Fund's manager invests in bonds and bond markets (including those in
emerging market countries) 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 AND MATURITY 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. The risk may be heightened in the case of
sovereign debt securities and for debt securities with longer maturities.
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 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> 169
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The risks of investing in foreign securities are more acute in countries
with developing economies. Since the Fund may invest a significant 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).
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 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>
<S> <C>
fees paid directly from
SHAREHOLDER FEES your investment
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00% none
Maximum sales charge (load)
imposed on reinvested
dividends.................... none none none none
Redemption fee(2)............ none none none none
Exchange fee................. none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B(3) CLASS C(3) CLASS I(3)
- ---------------------------------------------------------------------
<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....... 12.73% 12.73% 12.73% 12.64%
Total annual Fund
operating expenses... 13.73% 14.48% 14.48% 13.39%
Expenses
reimbursed(4)........ 12.23% 12.23% 12.23% 12.23%
Net Fund operating
expenses(4).......... 1.50% 2.25% 2.25% 1.16%
</TABLE>
(1) 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.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) The Fund has no outstanding Class B, Class C or Class I shares.
Percentages shown are estimates based on expenses for Class A
shares.
(4) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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. The expense information shown above has been
restated to reflect current fees.
- -------------------------------------------------------------------------
-- 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 $ 620 $ 728 $ 228 $ 328 $ 228 $ 118
3rd 1,027 1,106 806 806 806 475
5th 1,458 1,610 1,410 1,410 1,410 855
10th 2,653 2,863 2,863 3,044 3,044 1,924
</TABLE>
5
<PAGE> 170
[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. It is
possible to lose money by investing in the Fund.
INTEREST RATE AND MATURITY RISK: Many of the Fund's portfolio holdings are
susceptible to decline in a rising interest rate environment. The risk is more
acute for debt securities with longer maturities.
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> 171
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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
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>
<S> <C>
TOTAL RETURNS for the years ending
FOR CLASS A SHARES December 31
-------------------------------------------------------------
</TABLE>
[Chart]
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
'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
'99 4.16
</TABLE>
Best quarter Q2 '90: 7.64%
Worst quarter Q3 '93: (2.13%)
<TABLE>
<S> <C>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Past year................................................... 4.18% 4.29% 4.15%
Past 5 years................................................ 4.53% n/a n/a
Past 10 years............................................... 4.74% n/a n/a
Since inception*............................................ n/a 4.43% 4.42%
</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, 1999 was 4.79%.
-- 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>
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)(1)................ none none none
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none
Redemption fee(2)........ none none none
Exchange fee............. none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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....... 1.00% 0.89% 0.99%
Total annual Fund
operating expenses... 1.40% 1.29% 1.39%
Expenses
reimbursed(3)........ 0.52% 0.52% 0.52%
Net Fund operating
expenses(3).......... 0.88% 0.77% 0.87%
</TABLE>
(1) 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).
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 $ 90 $ 79 $ 89
3rd 366 332 363
5th 664 605 659
10th 1,513 1,385 1,499
</TABLE>
7
<PAGE> 172
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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 those rated in the four highest rating categories used by
Moody's and 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 debt securities that
are considered below investment grade (commonly referred to as "high yield" or
"junk" bonds). As much as 20% of the Fund's portfolio may be invested in foreign
securities (including those in emerging markets).
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 (including emerging
market countries). 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 debt 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 expects 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.
IVY BOND FUND AND IVY INTERNATIONAL STRATEGIC BOND FUND: Each 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.
- -- 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 or
exchange.
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
8
<PAGE> 173
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information (see back cover page for information on how you can receive a free
copy).
<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 X
Emerging markets..... X X
Foreign currencies*.. X X
Derivatives.......... X
Illiquid
securities*........ X X
Borrowing............ X X X
</TABLE>
* These are not principal strategies, as such, but tend to be associated with
the Funds' principal investments and have their own risks.
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
of specific disbursements from others (such as the International Monetary Fund
and more solvent foreign governments), 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 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
9
<PAGE> 174
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
dispose of securities in a timely fashion (resulting in a loss if the value of
the securities subsequently declines).
- - FOREIGN CURRENCIES: Foreign securities may be denominated in foreign
currencies. The value of a 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 and forward foreign currency contracts 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. These
investment techniques also tend to limit any potential gain that might result
from an increase in the value of the hedged position.
- - 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. 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
10
<PAGE> 175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
on resale. There is a risk that the investing Fund will not be able to dispose
of its illiquid securities on a timely basis 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 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.
- -- OTHER IMPORTANT INFORMATION
EUROPEAN MONETARY UNION: Ivy Bond Fund and Ivy International Strategic Bond Fund
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 is scheduled to be
completed by December 31, 2001, at which time euro bills and coins will be put
into circulation. The Fund could be affected by certain euro-related issues
(such as accounting differences and valuation problems) during this transitional
period. In addition, certain European Union members, including the United
Kingdom, did not officially implement the euro and may cause market disruptions
if they decide to do so.
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other eighteen series of
Ivy Fund. For the Funds' fiscal year ended December 31, 1999, the Funds paid IMI
a fee that was equal to the following percentages of the Funds' respective
average net assets:
- - Ivy Bond Fund, 0.69%;
- - Ivy Money Market Fund, 0.40%;
Ivy International Strategic Bond Fund pays IMI a fee at the rate of 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 10 years of
professional investment experience and 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.
11
<PAGE> 176
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME 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 quoted sale price on the exchange on which it
is principally traded.
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, 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: 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.
The following table displays the various investment minimums, sales charges and
expenses that apply to
12
<PAGE> 177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- - 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
13
<PAGE> 178
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
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. A CDSC of 1.00% may apply to shares redeemed
within two years of the end of the month in which they were purchased. 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 those that employ a registered representative who during a
specified time period sells a minimum dollar amount of the shares of a Fund
and/or other funds distributed by IMDI.
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 IMDI.
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 two years 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 1.00%, 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 reinvested dividends or
distributions, or on shares held over six years. If your shares have appreciated
in value, each share redeemed will include both your original cost (subject to
the above CDSC schedule) and any proportional increase in market value (not
subject to a CDSC). If your shares have depreciated in value, the CDSC will be
assessed on the market value of the shares being redeemed. At the time of
redemption, the calculation is performed on a share-by-share basis as described
below.
Shares will be redeemed 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.
14
<PAGE> 179
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - 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., Ste. 300
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 on this page.
- - 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
transmitting redemption orders in a proper form and in a timely manner. If you
choose to redeem directly through IMSC, you have several ways to submit your
request:
15
<PAGE> 180
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- - BY MAIL: Send your written redemption request to IMSC at one of the addresses
on page 15 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.
- - 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.
- - BY CHECK WRITING: The check writing privilege is only available to Ivy Money
Market Fund Class A shareholders and is not available for retirement accounts.
You may write checks against your Ivy Money Market Fund account. Checks
written must be for a minimum of $100. You may sign up for this option by
completing Section 8 of the Account Application. If you are redeeming shares
that have been purchased by check, payment may be delayed until your check has
cleared or for up to 15 calendar days after the date of purchase. Please note
that all registered owners named on the account must sign the signature card,
and only registered owners may have the check writing privilege on an account.
In order to qualify for the check writing privilege, Class A shareholders must
maintain a minimum average account balance of $1,000. Shares must be
uncertificated (i.e., held by the Fund) for any account requesting check
writing privileges. Checks can be reordered by calling IMSC at 800.777.6472.
Checking activity is reported on your statement and canceled check copies are
returned to you each month. There is no limitation on the number of checks a
shareholder may write.
When a check is presented for payment, the Fund redeems a sufficient number of
shares to cover the amount of the check. Checks written on accounts with
insufficient shares will be returned to the payee marked "non-sufficient
funds." There may be a nominal charge for each supply of checks, copies of
canceled checks, stop payment orders, checks drawn for amounts less than the
Fund minimum (i.e., $100) and checks returned for "non-sufficient funds." To
pay for these charges, the Fund automatically redeems an appropriate number of
the shareholder's Fund shares after the charges are incurred.
You may not close your Fund account by writing a check, because any earned
dividends will remain in your account. The Fund reserves the right to change,
modify or terminate the check writing service at any time upon notification
mailed to your address of record.
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.
16
<PAGE> 181
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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" on page 14 of this prospectus.
- - 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.
- - 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" 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.
17
<PAGE> 182
(IVY LEAF)
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- -- 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. 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. While
the Fund's managers may at times pursue strategies that result in tax efficient
outcomes for the Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
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 Ivy
International Strategic Bond 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.
18
<PAGE> 183
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.
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 each Fund's Annual Report to
shareholders (which is available upon request).
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY BOND FUND ----------------------------------------------------------
for the years
ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01
----------------------------------------------------------
(Loss) income from investment operations
Net investment income..................................... .67 .69 .80 .72 .67(a)
Net gains or losses on securities (both realized and
unrealized)............................................. (1.24) (.69) .42 .03 .84
----------------------------------------------------------
Total from investment operations.......................... (.57) -- 1.22 .75 1.51
----------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. .67 .68 .80 .72 .63
In excess of net investment income...................... .01 -- -- .01 --
Returns of capital........................................ -- -- -- -- .11
----------------------------------------------------------
Total distributions..................................... .68 .68 .80 .73 .74
----------------------------------------------------------
Net asset value, end of period.............................. $ 8.29 $ 9.54 $ 10.22 $ 9.80 $ 9.78
==========================================================
Total return (%)(b)......................................... (6.17) .00 11.87 8.06 17.41
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 69,249 $109,445 $106,497 $97,881 $108,840
Ratio of expenses to average net assets
With expense reimbursement (%)............................ -- -- -- -- 1.54
Without expense reimbursement (%)......................... 1.52 1.39 1.47 1.56 1.54
Ratio of net investment income to average net assets (%).... 7.40 6.88 7.08 7.36 7.09(a)
Portfolio turnover rate (%)................................. 28 43 71 90 93
</TABLE>
19
<PAGE> 184
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
IVY BOND FUND ---------------------------------------------------------------------------------
for the years ended for the years ended
December 31, December 31,
- ----------------------------------------------------------------------------------------------------------------
SELECTED PER 1999 1998 1997 1996 1995 1999 1998 1997
SHARE DATA ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.55 $ 10.24 $ 9.82
---------------------------------------------------------------------------------
(Loss) income from
investment operations
Net investment income...... .59 .59 .68 .64 .60(a) .62 .60 .64
Net gains or losses on
securities (both realized
and unrealized)........... (1.24) (.67) .46 .04 .84 (1.25) (.68) .48
---------------------------------------------------------------------------------
Total from investment
operations................ (.65) (.08) 1.14 .68 1.44 (.63) (.08) 1.12
---------------------------------------------------------------------------------
Less distributions
Dividends
From net investment
income.................. .59 .59 .72 .64 .56 .61 .60 .70
In excess of net
investment income....... .01 .02 -- .02 -- -- .01 --
Returns of capital.......... -- -- -- -- .11 -- -- --
---------------------------------------------------------------------------------
Total distributions....... .60 .61 .72 .66 .67 .61 .61 .70
---------------------------------------------------------------------------------
Net asset value, end of
period...................... $ 8.28 $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 8.31 $ 9.55 $10.24
=================================================================================
Total return (%)............. (6.97)(b) (.81)(b) 11.12(b) 7.25(b) 16.54(b) (6.81)(b) (.81)(b) 11.11(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................. $ 27,550 $42,166 $18,499 $5,300 $5,184 $3,928 $11,266 $6,580
Ratio of expenses to
average net assets
With expense
reimbursement (%)........ -- -- -- -- 2.29 -- -- --
Without expense
reimbursement (%)........ 2.36 2.13 2.21 2.29 2.29 2.26 2.12 2.20
Ratio of net investment
income to average net
assets (%)................. 6.55 6.13 6.35 6.62 6.34(a) 6.65 6.15 6.35
Portfolio turnover rate
(%)........................ 28 43 71 90 93 28 43 71
<CAPTION>
CLASS C
IVY BOND FUND -------------------
for the period
April 30, 1996
(commencement)
to December 31,
- ----------------------------- -------------------
SELECTED PER 1996
SHARE DATA -------------------
<S> <C> <C>
Net asset value, beginning of
period..................... $9.44
--------------------
(Loss) income from
investment operations
Net investment income...... .39
Net gains or losses on
securities (both realized
and unrealized)........... .43
--------------------
Total from investment
operations................ .82
--------------------
Less distributions
Dividends
From net investment
income.................. .39
In excess of net
investment income....... .05
Returns of capital.......... --
--------------------
Total distributions....... .44
--------------------
Net asset value, end of
period...................... $9.82
====================
Total return (%)............. 8.81(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................. $ 618
Ratio of expenses to
average net assets
With expense
reimbursement (%)........ --
Without expense
reimbursement (%)........ 2.35(d)
Ratio of net investment
income to average net
assets (%)................. 6.56(d)
Portfolio turnover rate
(%)........................ 90
</TABLE>
<TABLE>
<S> <C>
(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>
20
<PAGE> 185
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
IVY INTERNATIONAL -------------------------
STRATEGIC BOND FUND
for the period
October 19, 1999
(commencement)
to December 31,
- ----------------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA -------------------------
<S> <C>
Net asset value, beginning of period....................... $ 9.70
-------------------------
Income from investment operations
Net investment income (a)................................ .85
Net losses on securities (both realized and
unrealized)............................................ (.56)
-------------------------
Total from investment operations......................... .29
-------------------------
Less dividends from net investment income................ .16
-------------------------
Net asset value, end of period............................. $ 9.83
=========================
Total return (%)(b)........................................ 3.04
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 7
Ratio of expenses to average net assets (c)
With expense reimbursement (%)........................... 1.73
Without expense reimbursement (%)........................ 13.96
Ratio of net investment income to average net assets
(%)(a)(c)................................................ 5.71
Portfolio turnover rate (%)................................ 3
</TABLE>
<TABLE>
<S> <C>
(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>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
IVY MONEY MARKET FUND --------------------------------------------------------------
for the years ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <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)............................... .04 .05 .05 .04 .05
Less dividends from net investment income............... (.04) (.05) (.05) (.04) (.05)
--------------------------------------------------------------
Net asset value, end of period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================
Total return (%).......................................... 4.16 4.51 4.60 4.47 4.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $ 18,524 $19,103 $15,385 $21,359 $24,609
Ratio of expenses to average net assets
With expense reimbursement (%).......................... .88 .87 .88 .86 .85
Without expense reimbursement (%)....................... 1.40 1.42 1.57 1.86 1.39
Ratio of net investment income to average net assets
(%)(a).................................................. 4.17 4.50 4.60 4.47 4.91
</TABLE>
21
<PAGE> 186
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
IVY MONEY -------------------------------------------------------------------------------------------
MARKET FUND for the period
April 30, 1996
for the years ended for the years ended (commencement)
December 31, December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1999 1998 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------------------
Income from investment operations
Net investment income(a).......... .04 .05 .05 .05 .04 .05 .05 .03
Less dividends from net investment
income.......................... (.04) (.05) (.05) (.05) (.04) (.05) (.05) (.03)
-------------------------------------------------------------------------------------------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
Total return (%).................... 4.30 4.59 4.77 4.57 4.14 4.55 4.78 4.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $ 7,486 $6,636 $3,812 $3,474 $ 372 $ 423 $ 405 $ 74
Ratio of expenses to average net
assets
With expense reimbursement (%).... .77 .76 .70 .77 .87 .81 .70 .56(c)
Without expense reimbursement
(%)............................. 1.29 1.31 1.39 1.77 1.39 1.36 1.39 1.56(c)
Ratio of net investment income to
average net assets (%)(a)......... 4.28 4.61 4.77 4.57 4.18 4.56 4.78 4.78(c)
</TABLE>
<TABLE>
<S> <C>
(a) Net investment income is net of expenses reimbursed by
Manager.
(b) Total return represents aggregate total return.
(c) Annualized
</TABLE>
22
<PAGE> 187
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 9 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.)
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:
___ 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.
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).
__ $100,000 __ $250,000 __ $500,000
C. FOR DEALER USE ONLY
Confirmed trade orders: _____________ ________________ __________
Confirm Number Number of Shares Trade Date
<PAGE> 188
DETACH ON PERFORATION TO MAIL
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.
<TABLE>
<S> <C>
A. --- Reinvest all dividends and capital B. --- Pay all dividends in cash and
gains into additional shares of reinvest capital gains into additional
the same class of a different Ivy fund shares of the same class in this
account. account or a different Ivy fund account.
Fund name: -------------------- Fund name: --------------------
Account #: -------------------- Account #: --------------------
<S> <C>
A. --- Reinvest all dividends and capital C. --- Pay all dividends and capital
gains into additional shares of gains in cash.
the same class of a different Ivy fund
account.
Fund name: --------------------
Account #: --------------------
</TABLE>
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)
OPTIONAL SPECIAL FEATURES
6
- --
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.
<PAGE> 189
DETACH ON PERFORATION TO MAIL
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.)
CHECK WRITING ENROLLMENT FORM
8
- --
THIS FEATURE IS AVAILABLE TO IVY MONEY MARKET FUND CLASS A SHAREHOLDERS
ONLY. Checks must be written for a minimum of $100. Shares purchased in the
Fund may be subject to a holding period of up to 15 calendar days before
being redeemed by check. Please see the Prospectus for details.
HOW TO ENROLL
1. All registered owners must sign this form in the space provided below.
2. Check the appropriate Number of Signatures Required box to indicate the
number of signatures required when writing checks.
NUMBER OF SIGNATURES REQUIRED
[ ] One signature is required [ ] More than one signature is required
---------------------------------- [ ] All signatures are required
number of
signatures
required
IF NONE OF THE ABOVE IS CHECKED THEN ALL SIGNATURES WILL BE REQUIRED
---------------------------------------- --------------------
Authorized Signature Date
---------------------------------------- --------------------
Authorized Signature Date
---------------------------------------- --------------------
Authorized Signature Date
SIGNATURES
9
- --
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 9)
<PAGE> 190
DETACH ON PERFORATION TO MAIL
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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>
* Symbol not assigned as of this printing
<PAGE> 192
(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
1, 2000 (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
each Fund's 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, Ste. 300
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and each Fund's annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01FXINC0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
<PAGE> 193
[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 1, 2000 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
twenty-one 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 principal investment
strategies and risks
9 Management
9 Shareholder information
14 Financial highlights
17 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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, Ste. 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[MACKENZIE LOGO]
<PAGE> 194
[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). These securities typically are rated Ba or below by Moody's or BB or
below by S&P (or are judged by the Fund's manager to be of comparable quality).
The Fund may invest a portion of its assets in foreign (including emerging
market) debt securities to diversify its holdings and to increase its potential
return. The Fund may also invest in 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 AND MATURITY 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. You could lose money if you redeem your Fund
shares at a time when interest rates are rising. The risk is more acute for debt
securities with longer maturities.
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 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> 195
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on January 20, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
(CHART)
</TABLE>
Best quarter Q3 '99: (1.29%)
Worst quarter Q1 '99: (1.96%)
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
MORNINGSTAR
CORPORATE
BOND
ADVISOR GENERAL
CLASS UNIVERSE
-----------------------------------------------------------
<S> <C> <C>
Past year........................... (6.21%) (0.63%)
Since Inception*.................... (3.39%) 2.64%
</TABLE>
*The inception date for Advisor Class shares was January 20, 1998.
Morningstar Corporate Bond General Universe performance is calculated from
February 1, 1998.
- -- 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>
<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........................... 0.68%
Total annual Fund operating expenses..... 1.43%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**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 $ 146
3rd 452
5th 782
10th 1,713
</TABLE>
3
<PAGE> 196
[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 Fund's principal investments usually
include corporate bonds, mortgage or asset backed securities and government
obligations (including sovereign debt). 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).
Low rated debt securities typically are rated Ba or below by Moody's or BB or
below by S&P (or are judged by the Fund's manager to be of comparable quality).
The Fund's manager invests in bonds and bond markets (including those in
emerging market countries) 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 AND MATURITY 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. The risk may be heightened in the case of
sovereign debt securities and for debt securities with longer maturities.
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 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 significant portion of its
4
<PAGE> 197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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).
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 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>
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>
<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.......................... 12.73%
Total annual Fund operating expenses.... 13.48%
Expenses reimbursed**................... 12.23%
Net Fund operating expenses**........... 1.25%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, 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 certain other expenses). 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
5th 902
10th 2,021
</TABLE>
5
<PAGE> 198
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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 those rated in the four highest rating categories used by
Moody's and 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 debt securities that
are considered below investment grade (commonly referred to as "high yield" or
"junk" bonds). As much as 20% of the Fund's portfolio may be invested in foreign
securities (including those in emerging markets).
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 (including emerging
market countries). 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.
BOTH FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), 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.
- -- 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 or
exchange.
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 X
Emerging markets.............. X X
Foreign currencies*........... X X
Derivatives................... X
Illiquid securities*.......... X X
Borrowing..................... X X
</TABLE>
*These are not principal strategies, as such, but tend to be associated with the
Funds' principal investments and have their own risks.
6
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
of specific disbursements from others (such as the International Monetary Fund
and more solvent foreign governments), 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 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: Foreign securities may be denominated in foreign
currencies. The value of a 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 and forward foreign currency contracts 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. These
investment techniques also tend to limit any potential gain that might result
from an increase in the value of the hedged position.
- - 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. 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. There is a
risk that the investing Fund will not be able to dispose of its illiquid
securities on a timely basis 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.
8
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- 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 is
scheduled to be completed by December 31, 2001, at which time euro bills and
coins will be put into circulation. The Fund could be affected by certain
euro-related issues (such as accounting differences and valuation problems)
during this transitional period. In addition, certain European Union members,
including the United Kingdom, did not officially implement the euro and may
cause market disruptions if they decide to do so.
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other nineteen series of
Ivy Fund. For the Ivy Bond Fund's fiscal year ended December 31, 1999, the Fund
paid IMI a fee equal to 0.69% of the Fund's average net assets.
Ivy International Strategic Bond Fund pays IMI a fee at the rate of 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 10 years of
professional investment experience and 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.
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 quoted sale price on the exchange on which it
is principally traded.
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
9
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FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
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, 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; 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.
- -- 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., Ste. 300
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.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- - 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
transmitting redemption orders in proper form and 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 previous page. Be sure that all registered owners listed on the account
sign the request. Medallion signature guarantees and supporting legal
documentation may be required.
- - 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.
OTHER 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.
- - A Fund may make payment for redeemed shares in the form of securities of the
Fund taken at current values.
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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" 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 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 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 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. While the
Funds' managers may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
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
12
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- --------------------------------------------------------------------------------
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 Ivy
International Strategic Bond 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" tables are intended to help you understand each
Fund's financial performance and reflect results for a single Fund share.
The total returns in the tables 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 each Fund's
financial statements, is included in each Fund's Annual Report to
shareholders (which is available upon request).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY BOND FUND for the period
for the year January 20, 1998
ended (commencement)
December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $ 9.54 $10.28
---------------------------------------------------
Loss from investment operations
Net investment income.................................... .67 .69
Net gains or losses on securities (both realized
and unrealized)........................................ (1.24) (.72)
---------------------------------------------------
Total from investment operations......................... (.57) (.03)
---------------------------------------------------
Less distributions
Dividends
From net investment income............................. .67 .69
In excess of net investment income..................... .02 .02
---------------------------------------------------
Total distributions.................................... .69 .71
---------------------------------------------------
Net asset value, end of period............................. $ 8.28 $ 9.54
===================================================
Total return (%)........................................... (6.21)(a) (.30)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 332 $ 347
Ratio of expenses to average net assets (%)................ 1.43 1.11(c)
Ratio of net investment income to average net assets (%)... 7.43 7.16(c)
Portfolio turnover rate (%)................................ 28 43
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY INTERNATIONAL STRATEGIC for the period
BOND FUND May 3, 1999
(commencement)
to December 31,
- ----------------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA -------------------------
<S> <C>
Net asset value, beginning of period....................... $10.01
-------------------------
Income from investment operations
Net investment income(d)................................. .40
Net losses on securities (both realized and
unrealized)............................................ (.09)
-------------------------
Total from investment operations......................... .31
-------------------------
Less distributions
Dividends
From net investment income............................. .40
In excess of net investment income..................... .02
-------------------------
Total distributions.................................... .42
-------------------------
Net asset value, end of period............................. $ 9.90
=========================
Total return (%)(b)........................................ 3.19
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $1,390
Ratio of expenses to average net assets(c)
With expense reimbursement (%)........................... 1.25
Without expense reimbursement (%)........................ 13.48
Ratio of net investment income to average net assets
(%)(c)(d)................................................ 6.19
Portfolio turnover rate (%)................................ 3
</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
(d) Net investment income is net of expenses reimbursed by Manager.
14
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NOTES
- --------------------------------------------------------------------------------
15
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NOTES
- --------------------------------------------------------------------------------
16
<PAGE> 209
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> 210
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> 211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Bond Fund Advisor Class IVBVX 465897296
Ivy International Strategic Bond Fund
Advisor Class * 465898500
- ----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing.
<PAGE> 212
[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
1, 2000 (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
each Fund's 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, Ste. 300
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and each Fund's annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01FXINADV0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
<PAGE> 213
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
-- CONTENTS
2 Summary
4 Additional information
about principal investment
strategies and risks
6 Management
6 Shareholder information
13 Financial highlights
17 Account application
(Ivy Mackenzie Logo)
[Ivy Funds Logo]
May 1, 2000 IVY INTERNATIONAL FUND
<TABLE>
<S> <C>
Ivy Fund is a registered open-end investment company
consisting of twenty-one 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.
</TABLE>
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.
<TABLE>
<S> <C> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, 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>
<PAGE> 214
[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
(including common stock, preferred stock and securities convertible into common
stock) principally traded in European, Pacific Basin and Latin American markets.
To enhance potential return, the Fund may invest in countries with new or
comparatively undeveloped economies.
The Fund's manager uses a low turnover, value approach in selecting the Fund's
investments. Some of the Fund's investments may produce income (such as
dividends), although it is expected that any income realized would be
incidental.
- -- 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: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
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> 215
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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
compare with those of a broad measure of market performance. The Fund's
past performance is not necessarily an indication of how the Fund will
perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31(**)
-----------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '98: 16.41%
Worst quarter Q3 '90: (18.06%)
*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.
**Hakan Castegren, in his relationship with the following firms, has served
as the Fund's portfolio manager since its inception: Northern Cross
Investments Limited (since April 1, 1993); Boston Overseas Investors,
Inc. (July 1, 1990 -- March 31, 1993) and Marsh & Cunningham (November
15, 1985 -- June 30, 1990).
<TABLE>
<S> <C>
for the periods ending
AVERAGE ANNUAL TOTAL RETURNS(1) December 31, 1999
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MSCI
EAFE
CLASS A CLASS B CLASS C CLASS I INDEX
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............... 14.09% 15.15% 19.16% 21.66% 26.96%
Past 5 years............ 12.76% 12.92% n/a 14.51% 12.83%
Past 10 years........... 11.09% n/a n/a n/a 7.01%
Since inception:
Class B(2).............. -- 12.35% -- -- 11.19%
Class C(3).............. -- -- 12.90% -- 12.74%
Class I(4).............. -- -- -- 13.31% 11.97%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The inception date for the Fund's Class B shares is October 23,
1993. Index performance is calculated from October 31, 1993.
(3) The inception date for the Fund's Class C shares was April 30,
1996. Index performance is calculated accordingly.
(4) The inception date for the Fund's Class I shares was October 6,
1994. Index performance is calculated from September 30, 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
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends.... none none none none
Redemption fee(2)....... none none none none
Exchange fee............ none none none none
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees(3)....... 1.00% 1.00% 1.00% 1.00%
Distribution and/or
service (12b-1) fees..... 0.25% 1.00% 1.00% none
Other expenses........... 0.41% 0.42% 0.42% 0.18%
Total annual Fund
operating expenses....... 1.66% 2.42% 2.42% 1.18%
</TABLE>
(1) A CDSC of 0.50% may apply to Class A shares that are redeemed
within one year of the end of the month in which they were
purchased.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) 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 $ 734 $ 745 $ 245 $ 345 $ 245 $ 120
3rd 1,068 1,055 755 755 755 375
5th 1,425 1,491 1,291 1,291 1,291 649
10th 2,427 2,568 2,568 2,756 2,756 1,432
</TABLE>
3
<PAGE> 216
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
ABOUT PRINCIPAL 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 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.
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
(which are those rated in the four highest rating categories used by Moody's and
S&P), 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.
- -- 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
or exchange.
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).
- - EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller-company
securities 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
4
<PAGE> 217
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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 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: A number of the Fund's securities may be denominated in
foreign currencies. 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. These
investment techniques also tend to limit any potential gain that might result
from an increase in the value of the hedged position.
- - 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
5
<PAGE> 218
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
on resale. There is a risk that the Fund will not be able to dispose of its
illiquid securities on a timely basis 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 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.
- - 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 is scheduled to be completed by December
31, 2001, at which time euro bills and coins will be put into circulation. The
Fund could be affected by certain euro-related issues (such as accounting
differences and valuation problems) during this transitional period. In
addition, certain European Union members, including the United Kingdom, did not
officially implement the euro and may cause market disruptions if they decide to
do so.
MANAGEMENT
- -- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Suite 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Fund.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other twenty series of
Ivy Fund. For the Fund's fiscal year ended December 31, 1999, 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 1999 had over $10.8 billion in
assets under management. For its services, Northern Cross receives a fee from
IMI that is equal, on an annual basis, to 0.60% of the first $1.5 billion in
average net assets, 0.55% of the next $1 billion in average net assets and 0.50%
of 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 quoted sale price on the exchange on which it
is principally traded.
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
6
<PAGE> 219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 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:
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.
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 0.50% may apply to Class A shares that are redeemed within one year
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.
7
<PAGE> 220
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
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 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. A CDSC of 0.50% may apply to shares redeemed
within one year of the end of the month in which they were purchased. 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...................... 0.50%
Next $2,000,000....................... 0.25%
Over $5,000,000....................... 0.10%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI), including those that employ a registered representative who during a
specified time period sells a minimum dollar amount of shares of the Fund and/or
other funds distributed by IMDI.
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 reinvested dividends or
distributions, or on shares held over six years. If your shares have appreciated
in value, each share redeemed will include both your original cost (subject to
the above CDSC schedule) and any proportional increase in market value (not
subject to a CDSC). If your shares have depreciated in value, the CDSC will be
assessed on the market value of the shares being redeemed. At the time of
redemption, the calculation is performed on a share-by-share basis as described
below.
Shares will be redeemed 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.
8
<PAGE> 221
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Ivy International Fund. You
should note on the check the class of shares you wish to purchase (see page 7
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., Ste. 300
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 International 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
9
<PAGE> 222
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
choose to redeem through your registered securities dealer, the dealer is
responsible for transmitting redemption orders in proper form and 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 prior page. Be sure that all registered owners listed on the account
sign the request. Medallion signature guarantees and supporting legal
documentation may be required.
- - 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 International 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".
- - 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" on the next page).
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 9 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
10
<PAGE> 223
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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 of shares 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. While
the Fund's manager may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, the manager does not generally manage the Fund
to optimize tax efficiencies.
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
11
<PAGE> 224
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
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> 225
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 years ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60
----------------------------------------------------------------
Income from investment operations
Net investment income................................. .30 .37 .24 .20 .25
Net gains on securities (both realized and
unrealized)......................................... 8.31 2.50 3.47 5.85 3.22
----------------------------------------------------------------
Total from investment operations...................... 8.61 2.87 3.71 6.05 3.47
----------------------------------------------------------------
Less distributions
Dividends from net investment income.................. .24 .35 .21 .19 .25
Distributions
From capital gains.................................. 2.48 .22 .26 .64 .12
In excess of capital gains.......................... -- .13 .10 -- .03
----------------------------------------------------------------
Total distributions................................. 2.72 .70 .57 .83 .40
----------------------------------------------------------------
Net asset value, end of period.......................... $ 47.09 $ 41.20 $ 39.03 $ 35.89 $ 30.67
================================================================
Total return (%)(a)..................................... 21.05 7.34 10.38 19.72 12.65
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 1,573,615 $1,613,797 $1,705,772 $989,254 $475,989
Ratio of expenses to average net assets (%)............. 1.66 1.58 1.59 1.65 1.52
Ratio of net investment income to average net assets
(%)................................................... .63 .83 .68 .76 .97
Portfolio turnover rate (%)............................. 7 15 8 14 6
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
for the years ended
December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 40.97 $ 38.82 $ 35.73 $ 30.67 $ 27.60
----------------------------------------------------------------
Income from investment operations
Net investment (loss) income.......................... (.06) -- (.06) (.01) .01
Net gains on securities (both realized and
unrealized)......................................... 8.27 2.50 3.44 5.76 3.20
----------------------------------------------------------------
Total from investment operations...................... 8.21 2.50 3.38 5.75 3.21
----------------------------------------------------------------
Less distributions
Dividends
From net investment income.......................... -- -- -- -- .01
In excess of net investment income.................. -- -- -- .05 --
Distributions
From capital gains.................................. 2.40 .22 .21 .64 .10
In excess of capital gains.......................... -- .13 .08 -- .03
----------------------------------------------------------------
Total distributions................................. 2.40 .35 .29 .69 .14
----------------------------------------------------------------
Net asset value, end of period.......................... $ 46.78 $ 40.97 $ 38.82 $ 35.73 $ 30.67
================================================================
Total return (%)(a)..................................... 20.15 6.43 9.46 18.76 11.62
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 540,514 $ 542,997 $ 568,521 $312,161 $ 74,650
Ratio of expenses to average net assets (%)............. 2.42 2.41 2.42 2.45 2.44
Ratio of net investment (loss) income to average net
assets (%)............................................ (.13) (.01) (.15) (.04) .05
Portfolio turnover rate (%)............................. 7 15 8 14 6
</TABLE>
13
<PAGE> 226
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CLASS C
IVY INTERNATIONAL FUND -----------------------------------------------------
for the period
April 30, 1996
for the years ended (commencement)
December 31, to December 31,
- ------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 40.79 $ 38.64 $ 35.58 $ 32.68
-----------------------------------------------------
Income from investment operations
Net investment loss.............................. (.05) -- (.05) --
Net gains on securities (both realized and
unrealized).................................... 8.23 2.50 3.42 3.74
-----------------------------------------------------
Total from investment operations................. 8.18 2.50 3.37 3.74
-----------------------------------------------------
Less distributions
Dividends
From net investment income..................... -- -- .01 --
In excess of net investment income............. -- -- -- .20
Distributions
From capital gains............................. 2.40 .22 .21 .64
In excess of capital gains..................... -- .13 .09 --
-----------------------------------------------------
Total distributions............................ 2.40 .35 .31 .84
-----------------------------------------------------
Net asset value, end of period..................... $ 46.57 $ 40.79 $ 38.64 $ 35.58
=====================================================
Total return (%)................................... 20.16(a) 6.46(a) 9.50(a) 11.45(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 143,320 $154,378 $174,880 $44,450
Ratio of expenses to average net assets (%)........ 2.42 2.40 2.41 2.44(c)
Ratio of net investment loss to average net assets
(%).............................................. (.13) .01 (.14) (.03)(c)
Portfolio turnover rate (%)........................ 7 15 8 14
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CLASS I
-------------------------------------------------------
for the years ended
December 31,
- --------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 41.21 $ 39.06 $ 35.89 $ 30.67 $ 27.60
-------------------------------------------------------
Income from investment operations
Net investment income............................ .52 .55 .32 .27 .30
Net gains on securities (both realized and
unrealized).................................... 8.34 2.48 3.56 5.88 3.22
-------------------------------------------------------
Total from investment operations................... 8.86 3.03 3.88 6.15 3.52
-------------------------------------------------------
Less distributions
Distributions
From net investment income..................... .42 .53 .32 .27 .30
In excess of net investment income............. -- -- -- .02 --
Distributions
From capital gains............................. 2.56 .22 .28 .64 .12
In excess of capital gains..................... -- .13 .11 -- .03
-------------------------------------------------------
Total distributions.......................... 2.98 .88 .71 .93 .45
-------------------------------------------------------
Net asset value, end of period..................... $ 47.09 $ 41.21 $ 39.06 $ 35.89 $ 30.67
=======================================================
Total return (%)(a)................................ 21.66 7.75 10.87 20.06 12.85
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 166,816 $156,999 $115,046 $53,344 $13,020
Ratio of expenses to average net assets (%)........ 1.18 1.18 1.18 1.25 1.35
Ratio of net investment income to average net
assets (%)....................................... 1.11 1.23 1.08 1.16 1.14
Portfolio turnover rate (%)........................ 7 15 8 14 6
</TABLE>
<TABLE>
<S> <C>
(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>
14
<PAGE> 227
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 228
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
16
<PAGE> 229
Account
Application
FUND USE ONLY
-------------------
Account Number
-------------------
Dealer/Branch/Rep
-------------------
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail this application along with your
check 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) ( )
---------------------------------
<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.)
- --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.
<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
<TABLE>
<S> <C> <C> <C>
Confirmed trade orders: ------------------ ------------------ ------------------
Confirm Number Number of Shares Trade Date
</TABLE>
<PAGE> 230
DETACH ON PERFORATION TO MAIL
- --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 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.
- --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 "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> 231
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- 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> 232
(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 1, 2000
(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, Ste. 300
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 1-202-942-8090 for further
details). Reports and other information about the Fund are also
available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IIFXX0400
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Fund's transfer agent,
regarding any other
inquiries about the Fund
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivymackenzie.com.
IVY ASIA PACIFIC FUND
IVY CHINA REGION FUND
IVY DEVELOPING MARKETS 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 PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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 Markets Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Pan-Europe Fund and Ivy South America 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 ten 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 1, 2000 (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.
Each fund's Annual Report to shareholders, dated December 31, 1999
(each an "Annual Report"), is incorporated by reference into this sai. Each
fund's Annual Report may 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.........................................................5
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................5
IVY ASIA PACIFIC FUND..............................................6
INVESTMENT RESTRICTIONS FOR IVY ASIA PACIFIC FUND..................7
ADDITIONAL RESTRICTIONS.....................................................8
IVY CHINA REGION FUND..............................................9
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND.................10
ADDITIONAL RESTRICTIONS....................................................11
IVY DEVELOPING MARKETS FUND.......................................12
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING MARKETS FUND...........13
ADDITIONAL RESTRICTIONS....................................................14
IVY EUROPEAN OPPORTUNITIES FUND...................................15
INVESTMENT RESTRICTIONS FOR IVY
EUROPEAN OPPORTUNITIES FUND....................................17
ADDITIONAL RESTRICTIONS....................................................18
IVY GLOBAL FUND...................................................19
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND................................20
ADDITIONAL RESTRICTIONS....................................................21
IVY GLOBAL NATURAL RESOURCES FUND.................................22
INVESTMENT RESTRICTIONS FOR IVY
GLOBAL NATURAL RESOURCES FUND..................................22
ADDITIONAL RESTRICTIONS....................................................23
IVY GLOBAL SCIENCE & TECHNOLOGY FUND..............................25
INVESTMENT RESTRICTIONS FOR IVY
GLOBAL SCIENCE & TECHNOLOGY FUND........................................26
ADDITIONAL RESTRICTIONS....................................................27
IVY INTERNATIONAL FUND II.........................................28
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL FUND II.............29
ADDITIONAL RESTRICTIONS....................................................30
IVY INTERNATIONAL SMALL COMPANIES FUND............................31
INVESTMENT RESTRICTIONS FOR IVY
INTERNATIONAL SMALL COMPANIES FUND............................32
ADDITIONAL RESTRICTIONS....................................................33
IVY PAN-EUROPE FUND...............................................34
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND...................35
ADDITIONAL RESTRICTIONS....................................................36
IVY SOUTH AMERICA FUND............................................37
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND................38
ADDITIONAL RESTRICTIONS....................................................39
EQUITY SECURITIES.................................................40
CONVERTIBLE SECURITIES............................................40
SMALL COMPANIES...................................................41
INITIAL PUBLIC OFFERINGS..........................................41
NATURAL RESOURCES AND PHYSICAL COMMODITIES........................42
DEBT SECURITIES...................................................42
ILLIQUID SECURITIES...............................................46
FOREIGN SECURITIES................................................47
DEPOSITORY RECEIPTS...............................................48
EMERGING MARKETS..................................................48
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES.......................49
THE CHINA REGION..................................................50
SOUTH AMERICAN SECURITIES.........................................51
FOREIGN SOVEREIGN DEBT OBLIGATIONS................................52
BRADY BONDS.......................................................53
FOREIGN CURRENCY EXCHANGE TRANSACTIONS............................54
OTHER INVESTMENT COMPANIES........................................55
REPURCHASE AGREEMENTS.............................................55
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS.................56
COMMERCIAL PAPER..................................................56
BORROWING.........................................................56
WARRANTS 56
REAL ESTATE INVESTMENT TRUSTS (REITS).............................57
OPTIONS TRANSACTIONS..............................................57
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS................60
SECURITIES INDEX FUTURES CONTRACTS................................63
RISKS OF SECURITIES INDEX FUTURES. ..............................64
PORTFOLIO TURNOVER.........................................................65
TRUSTEES AND OFFICERS......................................................66
CLASS A...........................................................71
CLASS B 73
CLASS C 74
ADVISOR CLASS.....................................................78
INVESTMENT ADVISORY AND OTHER SERVICES.....................................81
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES..............81
DISTRIBUTION SERVICES.............................................84
CUSTODIAN.........................................................96
FUND ACCOUNTING SERVICES..........................................97
TRANSFER AGENT AND DIVIDEND PAYING AGENT..........................98
ADMINISTRATOR.....................................................98
AUDITORS 99
BROKERAGE ALLOCATION.......................................................99
CAPITALIZATION AND VOTING RIGHTS..........................................101
SPECIAL RIGHTS AND PRIVILEGES.............................................102
AUTOMATIC INVESTMENT METHOD...............................................103
EXCHANGE OF SHARES...............................................103
CONTINGENT DEFERRED SALES CHARGE SHARES..........................104
LETTER OF INTENT.................................................105
RETIREMENT PLANS.................................................106
REINVESTMENT PRIVILEGE...........................................110
RIGHTS OF ACCUMULATION...........................................110
SYSTEMATIC WITHDRAWAL PLAN.......................................111
GROUP SYSTEMATIC INVESTMENT PROGRAM..............................111
REDEMPTIONS...............................................................112
CONVERSION OF CLASS B SHARES..............................................114
NET ASSET VALUE...........................................................114
TAXATION 115
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS..........116
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES...........118
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES...............118
DEBT SECURITIES ACQUIRED AT A DISCOUNT...........................118
DISTRIBUTIONS....................................................119
DISPOSITION OF SHARES............................................120
FOREIGN WITHHOLDING TAXES........................................120
BACKUP WITHHOLDING...............................................121
PERFORMANCE INFORMATION..........................................122
IVY ASIA PACIFIC FUND.....................................................145
IVY CHINA REGION FUND.....................................................146
IVY DEVELOPING MARKETS FUND...............................................146
IVY EUROPEAN OPPORTUNITIES FUND...........................................147
IVY GLOBAL FUND...........................................................148
IVY GLOBAL NATURAL RESOURCES FUND.........................................148
IVY GLOBAL SCIENCE & TECHNOLOGY FUND......................................149
IVY INTERNATIONAL FUND II.................................................150
IVY INTERNATIONAL SMALL COMPANIES FUND....................................150
IVY SOUTH AMERICA FUND....................................................151
FINANCIAL STATEMENTS......................................................153
APPENDIX A................................................................154
<PAGE>
GENERAL INFORMATION
Each Fund other than Ivy South America Fund is organized as a separate,
diversified portfolio of the Trust, an open-end management investment company
organized is a Massachusetts business trust on December 21, 1983. Ivy South
America Fund is organized as a separate, non-diversified portfolio of the Trust.
Ivy Asia Pacific Fund commenced operations on January 1, 1997. Ivy China Region
Fund commenced operations (Class A and Class B shares) on October 22, 1993;
Class C commenced operations on April 30, 1996. Ivy Developing Markets Fund
commenced operations (Class A and Class B shares) on November 1, 1994; Class C
commenced operations on April 30, 1996. Ivy European Opportunities Fund
commenced operations on May 3, 1999. Ivy Global Fund commenced operations (Class
A shares) on April 18, 1991; Class B commenced operations on April 1, 1994; and
Class C commenced operations on April 30, 1996. Ivy Global Natural Resources
Fund and Ivy International Small Companies Fund commenced operations on January
1, 1997. Ivy Global Science & Technology Fund commenced operations on July 22,
1996. Ivy International Fund II and Ivy Pan-Europe Fund (Class A and Class B
shares) commenced operations on May 13, 1997. Class C shares of Ivy Pan-Europe
Fund were first issued on January 28, 1998. Ivy South America Fund commenced
operations (Class A and Class B shares) on November 1, 1994; Class C commenced
operations on April 30, 1996.
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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, 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 a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
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 SAI 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. As a fundamental policy, the Fund does not 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 & Poor's Ratings Services ("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
from banks in accordance with the provisions of the 1940 Act, 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 in other investment companies that invest in
securities issued in Asia-Pacific countries in accordance with the provisions of
the 1940 Act, 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. The Fund may write or buy straddles or
spreads. 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 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time
to time.
(ii) The Fund will not issue senior securities, except as permitted
under the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii)The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the Fund
may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
(iv) The Fund will not purchase or sell real estate (which term does
not include securities of companies that deal in real estate or
mortgages or investments secured by real estate or interests
therein), except that the Fund may hold and sell real estate
acquired as a result of the Fund's ownership of securities.
(v) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may invest in
commodities futures contracts and options thereon to the extent
permitted by the Prospectus and this SAI.
(vi) The Fund will not make loans to other persons, except (a) loans
of portfolio securities, and (b) to the extent that entry into
repurchase agreements and the purchase of debt instruments or
interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
(vii)The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection
with the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
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 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;
(ii) 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;
(iii) sell securities short, except for short sales "against the box";
(iv) borrow money, except for temporary or emergency purposes. The
Fund 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" total assets;
(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; or
(vi) 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.
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 in 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 in other
investment companies in accordance with the provisions of the 1940 Act, 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 (as defined in the 1940 Act) of a majority of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of
an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time
to time.
(iii)The Fund will not issue senior securities, except as permitted
under the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the Fund
may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does
not include securities of companies that deal in real estate or
mortgages or investments secured by real estate or interests
therein), except that the Fund may hold and sell real estate
acquired as a result of the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may invest in
commodities futures contracts and options thereon to the extent
permitted by the Prospectus or this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans
of portfolio securities, and (b) to the extent that entry into
repurchase agreements and the purchase of debt instruments or
interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection
with the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
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;
(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;
(vi) 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
IVY DEVELOPING MARKETS FUND
Ivy Developing Markets 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 Markets 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 from banks in
accordance with the provisions of the 1940 Act, 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 in other investment companies in accordance with the
provisions of the 1940 Act, 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 MARKETS FUND
Ivy Developing Markets 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of
an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time
to time.
(iii)The Fund will not issue senior securities, except as permitted
under the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the Fund
may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does
not include securities of companies that deal in real estate or
mortgages or investments secured by real estate or interests
therein), except that the Fund may hold and sell real estate
acquired as a result of the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may invest in
commodities futures contracts and options thereon to the extent
permitted by the Prospectus or this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans
of portfolio securities, and (b) to the extent that entry into
repurchase agreements and the purchase of debt instruments or
interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection
with the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, Ivy Developing Markets 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;
(vi) borrow money, except for temporary or emergency purposes.
The Fund 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
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 (v) 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.
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.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading. 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 Services ("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 in accordance with the provisions of the 1940
Act. The Fund may also invest in other investment companies in accordance with
the provisions of the 1940 Act, and may invest 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. The Fund may also write or buy straddles or spreads.
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. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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";
(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;
(vi) 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;
(vii) make investments in securities for the purpose of exercising
control over or management of the issuer; or
(viii) invest in interests in oil, gas and/or mineral exploration
or development programs (other than securities of companies
that invest in or sponsor such programs).
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 in other investment companies in
accordance with the provisions of the 1940 Act, and may invest up to 15% of its
net assets in illiquid securities. The Fund may not 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. The Fund may also write and buy straddles and spreads.
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. The Fund
has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by its Prospectus.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(ii) purchase or sell interests in oil, gas or mineral leases
(other than securities of companies that invest in or
sponsor such programs);
(iii) invest in oil, gas and/or mineral exploration or development
programs;
(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 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 any security if, as a result, the Fund would then
have more than 5% of its total assets (taken at current
value) invested in securities restricted as to disposition
under the Federal securities laws; or
(ix) purchase securities of another investment company, except in
connection with a merger, consolidation, reorganization or
acquisition of assets, and except that the Fund may invest
in securities of other investment companies subject to the
restrictions in Section 12(d)(1) of the Investment Company
Act of 1940 (the "1940 Act").
The Fund does not interpret fundamental restriction (v) to
prohibit investment in real estate investment trusts.
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 from banks in accordance with the provisions of the 1940
Act, 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 in other investment
companies in accordance with the provisions of the 1940 Act, and may invest 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.
The Fund may also write or buy puts, calls, straddles or spreads.
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. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in (a) commodities futures contracts and options
thereon to the extent permitted by the Prospectus and this
SAI and (b) commodities relating to natural resources, as
described in the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 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;
(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 1940 Act 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) invest in interests in oil, gas and/or mineral exploration
or development programs;
(v) sell securities short, except for short sales "against the
box;"
(vi) borrow money, except for temporary or emergency purposes.
The Fund 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" total assets;
(vii) 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;
(viii) 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; or
(ix) make investments in securities for the purpose of exercising
control over or management of the issuer.
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 (v) 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.
VY 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. Investments made by the Fund may include securities issued
pursuant to IPOs. The Fund may also engage in short-term trading.
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) in
other investment companies in accordance with the provisions of the 1940 Act 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. The Fund has adopted the following fundamental
investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 or
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;
(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 emergency purposes.
(vi) purchase securities on margin;
(vii) sell securities short, except for short sales "against the
box"; or
(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.
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 (v) 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.
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 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), 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 in other investment companies in accordance with the
provisions of the 1940 Act and up to 15% of its net assets in illiquid
securities.
The Fund may purchase put and call options on securities and stock
indices, provided the premium paid for such options does not exceed 5% of the
Fund's net assets. The Fund may also sell covered put options with respect to up
to 10% of the value of its net assets, and may write covered call options so
long as not more than 25% of the Fund's net assets are subject to being
purchased upon the exercise of the calls. For hedging purposes only, the Fund
may engage in transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(iv) sell securities short, except for short sales, "against the
box;"
(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 emergency purposes.
(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 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; or
(viii) purchase the securities of any other open-end investment
company, except as part of a plan of merger or
consolidations.
Ivy International Fund II will continue to interpret fundamental
investment restriction (v) 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.
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. The Fund may purchase securities issued pursuant to IPOs. The
Fund may engage in short-term trading.
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 from banks in accordance with the provisions of the 1940 Act,
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 in other investment companies in
accordance with the provisions of the 1940 Act, and may invest 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. The Fund may also write or buy straddles or spreads.
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. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 in oil, gas and/or mineral exploration or development
programs;
(iv) 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;
(v) borrow money, except for temporary or emergency purposes.
The Fund 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;
(vi) 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 1940 Act and rules thereunder;
(vii) sell securities short, except for short sales "against the
box;"
(viii) 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;
(ix) make investments in securities for the purpose of exercising
control over or management of the issuer; or
(x) 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.
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. As a fundamental policy, the Fund does not
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
from banks in accordance with the provisions of the 1940 Act, 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 in other investment companies in accordance with the provisions of the
1940 Act, and may invest 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. The Fund may also write or buy straddles or
spreads.
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.
The Fund has adopted the following fundamental investment restrictions:
The Fund has elected to be classified as a diversified series of an
open-end investment company.
(i) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(ii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iii) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(iv) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(v) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vi) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(vii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 in oil, gas and/or mineral exploration or development
programs;
(iv) 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;
(v) borrow money, except for temporary or emergency purposes.
The Fund 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;
(vi) 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;
(vii) sell securities short, except for short sales "against the
box";
(viii) 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 IMI, for the sale or purchase of portfolio
securities shall not be considered participation in a joint
securities trading account;
(ix) make investments in securities for the purpose of exercising
control over or management of the issuer; or
(x) 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.
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 SAI is defined
as 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. As a
fundamental restriction, the Fund will not 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 from banks in accordance with the provisions
of the 1940 Act (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 in other
investment companies in accordance with the provisions of the 1940 Act, 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus or this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
The Fund will not concentrate its investments in a particular industry, as the
term "concentrate" is interpreted in connection with the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
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) borrow money, except for temporary or emergency purposes.
The Fund 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" total assets;
(vi) 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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 and AAA by
S&P are judged to be of the best quality (i.e., capacity to pay interest and
repay principal is extremely strong). Bonds rated Aa/AA are considered to be of
high quality (i.e., capacity to pay interest and repay principal is very strong
and differs from the highest rated issues only to a small degree). Bonds rated A
are viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). 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, if so, could 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.
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 and Brazil 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.
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 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. 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 or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
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. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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.
The portfolio turnover rate for Ivy Asia Pacific fund was significantly
higher in 1999 than it was in 1998 because of a significant increase in the
performance of the Hong Kong market in 1999. The portfolio turnover rate for Ivy
Global Natural Resources Fund was significantly higher in 1999 than it was in
1998 because of a significant increase in the sale of shares of that Fund. The
portfolio turnover rate for Ivy International Small Companies Fund was
significantly higher in 1999 than it was in 1998 because of a significant
increase in the net assets of that fund.
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:
<TABLE>
<CAPTION>
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND
PRINCIPAL OCCUPATIONS
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested person" Investment Management Inc. (1995-present);
of the Trust, as defined under the Senior Vice President, Mackenzie Investment
1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present);
800 Hickory Blvd. Chairman, Broyhill Family Foundation, Inc.
Golfview Park-Box 500 (1983-present); Chairman, Broyhill Investments,
Lenoir, NC 28645 Inc. (1997-present); Chairman and President,
Age: 76 Broyhill Investments, Inc. (1983-1997);
Chairman, Broyhill Timber Resources
(1983-present); Management of a personal
portfolio of fixed-income and equity
instruments (1983-present); Trustee of
Mackenzie Series Trust (1988-1998); Director of
The Mackenzie Funds Inc. (1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested person" President, Mackenzie Investment Management Inc.
Of the Trust, as defined under the (1996-1997); Senior Vice President and
1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998).
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
* The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel
Jr., P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares
(34.67%) and Merrill Lynch Pierce Fenner & Smith For the sole benefit OF ITS
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd Fl Jacksonville,
FL 32246, owned of record 57,697.052 shares (15.64%);
IVY BOND FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
IVY CHINA REGION FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
IVY EUROPEAN OPPORTUNITIES FUND, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its Customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3RD FL, Jacksonville, FL 32246, owned of record 733,792.800 shares
(25.95%);
IVY GLOBAL NATURAL RESOURCES FUND, Carn & Co. 02087502 Riggs Bank TTEE
FBO Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
IVY GROWTH WITH INCOME FUND, Amalgamated Bank of NY C/F TWU-NYC
Private Bus Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370,
Cooper Station New York, NY 10003, owned of record 268,780.923 shares (6.27%);
IVY INTERNATIONAL FUND, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith
for the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3RD Floor, Jacksonville, FL 32246, owned of record 6,025,817.607
(21.07%);
IVY INTERNATIONAL FUND II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
IVY INTERNATIONAL SMALL COMPANIES FUND, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
IVY INTERNATIONAL STRATEGIC BOND FUND, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
IVY MONEY MARKET FUND, Donald Annino TTEE Pediatrician Inc. Target
Benefit Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890,
owned of record 784,722.350 shares (5.36%);
IVY PAN-EUROPE FUND, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
IVY US EMERGING GROWTH FUND, F & Co. Inc. CUST FBO 401 K Plan, Attn:
Russ Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
IVY SOUTH AMERICA FUND, FTC & Co. Attn: Datalynx #001, P.O. Box
173736, Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and
Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
IVY DEVELOPING MARKETS FUND, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
IVY GLOBAL SCIENCE & TECH FUND, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3RD FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
IVY ASIA PACIFIC FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
IVY BOND FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
IVY CHINA REGION FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
IVY DEVELOPING MARKETS FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3RD FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
IVY EUROPEAN OPPORTUNITIES FUND, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3RD FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
IVY GLOBAL FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
GLOBAL NATURAL RESOURCES FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3RD FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
IVY GLOBAL SCIENCE & TECH FUND, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3RD FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
IVY GROWTH FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
IVY GROWTH WITH INCOME FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3RD FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
IVY INTERNATIONAL FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
IVY INTERNATIONAL II FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
IVY INTERNATIONAL SMALL COMPANIES FUND, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E, 3RD FL, Jacksonville, FL, owned of record 33,931.288 shares
(20.64%) and Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD
5/2/94 Martha K Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record
10,022 shares (6.09 %);
IVY PAN-EUROPE FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
IVY SOUTH AMERICA FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and
Prudential Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy
Shargorodsky Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record
20,520.944 shares (13.76%);
IVY US BLUE CHIP FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3RD FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
IVY US EMERGING GROWTH FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3RD FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
IVY ASIA PACIFIC FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3RD FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert
M. Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
IVY BOND FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD
FL, Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
IVY CHINA REGION FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3RD FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
IVY DEVELOPING MARKETS FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
IVY EUROPEAN OPPORTUNITIES FUND, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
IVY GLOBAL FUND, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), SALOMON SMITH BARNEY INC., 333 WEST 34TH ST. - 3RD
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
IVY GLOBAL NATURAL RESOURCES FUND, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 SHARES (35.64%),
SALOMON SMITH BARNEY INC. 00129805698, 333 WEST 34TH ST. - 3RD Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, OWNED OF RECORD 2,034.101 SHARES (6.71%) AND RAYMOND
JAMES & ASSOC. INC. CSDN DAVID C JOHNSON M/P, 1113 45TH Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
IVY GLOBAL SCIENCE & TECHNOLOGY FUND, Merrill Lynch Pierce Fenner &
Smith Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3RD FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
IVY GROWTH FUND, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
IVY GROWTH WITH INCOME FUND, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170TH ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO VYTAUTAS SNIEKUS, 1250 E 276TH St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
IVY INTERNATIONAL FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
IVY INTERNATIONAL FUND II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
IVY INTERNATIONAL SMALL COMPANIES FUND, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares
(71.10%);
IVY MONEY MARKET FUND, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K AISTROPE & MARY SUE JENKINS JT TEN, 1635 N. 106TH Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
IVY PAN-EUROPE FUND, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
IVY SOUTH AMERICA FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
IVY US BLUE CHIP FUND, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
IVY US EMERGING GROWTH FUND, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
IVY EUROPEAN OPPORTUNITIES FUND, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
IVY INTERNATIONAL FUND, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison
Engines, 200 Newport Ave., 7th Floor, North Quincy, Ma 02171, owned of record
327,350.589 shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box
83084, Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%),
Harleysville Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438,
owned of record 191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great
Lakes Chemical RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S,
Chicago, IL 60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark
Taper Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049,
owned of record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company
FBO Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
IVY ASIA PACIFIC FUND, Brown Brothers Harriman & Co. CUST,
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 19,521.431 shares (73.06%), Brown Brothers
Harriman & Co. CUST International Solutions V- Aggressive Growth, Attn: Terron
McGovern, 40 Water St. Boston, MA 02109, owned of record 5,387.835 shares
(20.17%), Brown Brothers Harriman & Co. CUST International Solutions II -
Balanced Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned
of record 1,602.659 shares (6.00%);
IVY BOND FUND, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
IVY CHINA REGION FUND, Brown Brothers Harriman & Co. CUST
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 32,622.646 shares (61.95%), Brown Brothers
Harriman & Co. CUST International Solutions III - Moderate Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 9,740.980 shares
(18.49%), Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd FL,
Jacksonville, FL owned of record 5,243.316 shares (9.95%), and Brown Brothers
Harriman & Co. CUST International Solutions V - Aggressive Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 3,240.952 shares
(6.15%);
IVY DEVELOPING MARKETS FUND, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
IVY EUROPEAN OPPORTUNITIES FUND, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
IVY GLOBAL FUND, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
IVY GLOBAL NATURAL RESOURCES FUND, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
IVY GLOBAL SCIENCE & TECH FUND, Robert Chapin & Michelle Broadfoot TTEE
Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton, FL
33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
IVY GROWTH FUND, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
IVY GROWTH WITH INCOME FUND, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
IVY INTERNATIONAL FUND II, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 35,889.863 shares (24.70%), Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 26,271.557 shares (18.08%) and
Brown Brothers Harriman & Co. CUST International Solutions III - Moderate
Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 23,078.909 shares (15.88%);
IVY INTERNATIONAL SMALL COMPANIES FUND, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
IVY INTERNATIONAL STRATEGIC BOND FUND, Mackenzie Investment Management
Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste.
300, Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
IVY PAN-EUROPE FUND, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
IVY SOUTH AMERICA FUND, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
IVY US BLUE CHIP FUND, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
IVY US EMERGING GROWTH FUND, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%)
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The code of ethics permits employees of IMI, IMDI and the
trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the code of ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the code of ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as
manager and investment adviser to the other series of Ivy 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, 1998 and 1999, Ivy
Global Natural Resources Fund paid IMI fees of $32,056, $20,977 and $35,984,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses in the amount of $25,180, $147,952 and $170,530,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
the Fund paid MFC fees of $32,056, $20,977 and $35,984, 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, 1997, 1998 and 1999, Ivy
Asia Pacific Fund paid IMI fees of $10,473, $49,509 and $72,724, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, IMI reimbursed
Fund expenses of $10,473, $167,194 and $119,280, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
China Region Fund paid IMI fees of $277,601, $187,381 and $191,792,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses of $18,377, $105,095 and $125,910, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Developing Markets Fund paid IMI fees of $284,290, $156,166 and $152,772,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses of $22,860, $200,839 and $149,367, respectively.
During the period from commencement (May 3, 1999) through December 31,
1999, Ivy European Opportunities Fund paid IMI fees of $27,735. During the same
period, IMI reimbursed Fund expenses in the amount of $107,722.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Fund paid IMI fees of $383,981, $275,958 and $202,715, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $0,
$98,102 and $120,751, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Science & Technology Fund paid IMI fees of $229,616, $280,079 and
$466,093, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $0, $0 and $0, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal years ended December 31, 1998 and 1999, Ivy
International Fund II paid IMI fees of $413,862, $1,356,028 and $1,533,107,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $123,177, $186,536 and $226,984, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
International Small Companies Fund paid IMI fees of $28,799, $34,504 and
$28,729, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $28,799, $134,787 and $178,983, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal years ended December 31, 1998 and 1999, Ivy
Pan-Europe Fund paid IMI fees of $1,974, $43,978 and $57,684, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $1,974,
$148,399 and $131,352, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
South America Fund paid IMI fees of $94,278, $53,857 and $25,779, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, IMI reimbursed
Fund expenses of $68,548, $145,687 and $155,981, 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.
With respect to all Funds other than Ivy Global Science and Technology
Fund, 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% (1.50% in the case of Ivy International Fund II) 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 years ended DECEMBER 31, 1997, 1998 and 1999, IMDI
received from sales of Class A Shares of Ivy Asia Pacific Fund $28,616, $45,623
and $21,454, respectively, in sales commissions, of which $3,127, $4,654 and
$2,008, respectively, was retained after dealer allowances. During the fiscal
year ended December 31, 1999, IMDI received $521 in CDSCs on redemptions of
Class B shares of Ivy Asia Pacific Fund. During THE FISCAL YEAR ENDED DECEMBER
31, 1999, IMDI received $1,315 in CDSCs on redemptions of Class C shares of Ivy
Asia Pacific Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy China Region Fund $119,166,
$57,500, and $24,061, respectively, in sales commissions, of which $16,807,
$6,494, AND $3,501, RESPECTIVELY, was retained after dealer allowances. During
the fiscal year ended December 31, 1999, IMDI received $4,816 in CDSCs on
redemptions of Class B shares of Ivy China Region Fund. During the fiscal year
ended December 31, 1999, IMDI received $2,810 in CDSCs on redemption of Class C
shares of Ivy China Region Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Developing Markets Fund $107,081,
$25,728, and $15,886, respectively, in sales commissions, of which $13,412,
$2,583, and $2,505, respectively, was retained after dealer allowances. During
the fiscal year ended December 31, 1999, IMDI received $6,773 in CDSCs on
redemptions of Class B shares of Ivy Developing Markets Fund. During the fiscal
year ended December 31, 1999, IMDI received $5,645 in CDSCs on redemptions of
Class C shares of Ivy Developing Markets Fund.
During the fiscal year ended December 31, 1999, IMDI received from
sales of Class A shares of Ivy European Opportunities Fund $401,890 in sales
commissions, of which $48,186 was retained after dealer ALLOWANCES. DURING THE
FISCAL YEAR ENDED DECEMBER 31, 1999, IMDI received $0 in CDSCs on redemptions of
Class B shares of Ivy European Opportunities Fund. During the fiscal year ended
December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class C shares of
Ivy European Opportunities Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Global Fund $74,515, $17,112, and
$8,985, respectively, in sales commissions, of which $10,387, $2,536, and
$1,782, respectively, was retained after dealer allowances. During the fiscal
year ended December 31, 1999, IMDI received $3,960 in CDSCs on redemptions of
Class B shares of Ivy Global Fund. During the fiscal year ended December 31,
1999, IMDI received $699 in CDSCs on redemptions of Class C shares of Ivy Global
Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Global Natural Resources Fund
$35,134, $3,682, and $5,378, respectively, in sales commissions, of which
$5,286, $580, and $596, respectively, was retained after dealer allowances.
During the fiscal year ended DECEMBER 31, 1999, IMDI received $2,705 in CDSCs on
redemptions of Class B shares of Ivy Global Natural Resources Fund. During the
fiscal year ended December 31, 1999, IMDI received $312 in CDSCs on redemptions
of Class C shares of Ivy Global Natural Resources Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Global Science & Technology Fund
$243,079, $54,052, and $117,902, respectively., in sales commissions, of which
$32,035, $7,170, and $14,767, respectively, was retained after dealer
allowances. During THE FISCAL YEAR ENDED DECEMBER 31, 1999, IMDI received $3,615
in CDSCs on redemptions of Class B shares of Ivy Global Science & Technology
Fund. During the fiscal year ended December 31, 1999, IMDI received $1,772 in
CDSCs on redemptions of Class C shares of Ivy Global Science & Technology Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy International Fund II $765,930,
$432,944, and $189,094, respectively, in sales commissions, of which $64,358,
$31,170, and $17,300, respectively, was retained after dealer allowances. During
the fiscal year ended December 31, 1999, IMDI received $85,785 in CDSCs on
redemptions of Class B shares of Ivy International Fund II. During the fiscal
year ended December 31, 1999, IMDI received $51,163 in CDSCs on redemptions of
Class C shares of Ivy International Fund II.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy International Small Companies Fund
$53,343, $7,460, and $2,271, respectively, in sales commissions, of which
$5,425, $578, and $268, respectively, was retained after dealer allowances.
During the fiscal year ended December 31, 1999, IMDI received $2,951 in CDSCs on
redemptions of Class B shares of Ivy International Small Companies Fund. During
the fiscal year ended December 31, 1999, IMDI received $1,565 in CDSCs on
redemptions of Class C shares of Ivy International Small Companies Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Pan-Europe Fund $2,609, $42,584,
and $7,235, respectively, in sales commissions, of which $418, $5,031, and
$1,025, respectively, was retained after dealer allowances. During the fiscal
year ended December 31, 1999, IMDI received $0 in CDSCs on redemptions of
Class B shares of Ivy Pan-Europe Fund. During the fiscal year ended December 31,
1999, IMDI received $312 in CDSCs on redemptions of Class C shares of Ivy
Pan-Europe Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy South America Fund $37,420, $2,139,
and $4,482, respectively, in sales commissions, of which $5,358, $275, and $210,
respectively, was retained after dealer allowances. During the fiscal year ended
December 31, 1999, IMDI received $731 in CDSCs on redemptions of Class B shares
of Ivy South America Fund. During the fiscal year ended December 31, 1999, IMDI
received $223 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 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 banks,
investment advisers, financial institutions and other entities 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 or other party 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, 1999, Ivy Asia Pacific Fund
paid IMDI $4,458 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999 Ivy Asia Pacific Fund paid IMDI $29,339 pursuant to its Class
B plan. During the fiscal year ended December 31, 1999, the Fund paid IMDI
$25,172 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Asia Pacific Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $2,907; compensation to underwriters $0; compensation to
dealers, $796; compensation to sales personnel, $6,577; interest, carrying or
other financing charges $0; seminars and meetings, $199; travel AND
entertainment, $663; general and administrative, $3,960; telephone, $202; and
occupancy and equipment rental, $518.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Asia Pacific Fund:
advertising, $26; printing and mailing of prospectuses to persons other than
Current shareholders, $4,978; compensation to underwriters $0; compensation to
dealers, $3,829; compensation to sales personnel, $11,115; interest, carrying or
other financing charges $0; seminars and meetings, $957; travel and
entertainment, $1,118; general and administrative, $6,588; telephone, $340; and
occupancy and equipment rental, $863.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Asia Pacific Fund:
advertising, $11; printing and mailing of prospectuses to persons other than
current shareholders, $4,293; compensation to underwriters $0; compensation to
dealers, $4,867; compensation to sales personnel, $9,603; interest, carrying or
other financing charges $0; seminars and meetings, $1,217; travel and
entertainment, $965; general and administrative, $5,708; telephone, $295; and
occupancy and equipment rental, $747.
During the fiscal year ended December 31, 1999, Ivy China Region Fund
paid IMDI $28,776 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999 Ivy China Region Fund paid IMDI $68,312 pursuant to its Class
B plan. During the fiscal year ended December 31, 1999, the Fund paid IMDI
$7,429 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy China Region Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $16,851; compensation to underwriters $0; compensation to
dealers, $5,564; compensation to sales personnel, $42,802; interest, carrying or
other financing charges $0; seminars and meetings, $1,391; travel and
entertainment, $4,294; general and administrative, $25,669; telephone, $1,317;
and occupancy and equipment rental, $3,364.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy China Region Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $10,102; compensation to underwriters $0; compensation to
dealers, $7,686; compensation to sales personnel, $25,491; interest, carrying or
other financing charges $0; seminars and meetings, $1,922; travel and
entertainment, $2,562; general and administrative, $15,292; telephone, $785; and
occupancy and equipment rental, $2,004.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy China Region Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $1,077; compensation to underwriters $0; compensation to
dealers, $1,237; compensation to sales personnel, $2,761; interest, carrying or
other financing charges $0; seminars and meetings, $310; travel and
entertainment, $277; general and administrative, $1,668; telephone, $85; and
occupancy and equipment rental, $218.
During the fiscal year ended December 31, 1999, Ivy Developing Markets
Fund paid IMDI $13,129 pursuant to its Class A plan. During the fiscal year
ended December 31, 1999 Ivy Developing Markets Fund paid IMDI $67,796 pursuant
to its Class B plan. During the fiscal year ended December 31, 1999, the Fund
paid IMDI $30,867 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Developing Markets Fund:
advertising, $0; printing and mailing of prospectuses to persons other THAN
current shareholders, $8,092; compensation to underwriters $0; compensation to
dealers, $1,022; compensation to sales personnel, $3,987; interest, carrying or
other financing charges $0; seminars and meetings, $256; travel and
entertainment, $650; general and administrative, $2,247; telephone, $136; and
occupancy and equipment rental, $212.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Developing Markets Fund:
advertising, $0; printing and mailing of prospectuses to persons other THAN
current shareholders, $14,771; compensation to underwriters $0; compensation to
dealers, $7,791; compensation to sales personnel, $25,450; interest, carrying or
other financing charges $0; seminars and meetings, $1,947; travel and
entertainment, $2,556; general and administrative, $15,325; telephone, $784; and
occupancy and equipment rental, $2,008.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Developing Markets Fund:
advertising, $11; printing and mailing of prospectuses to persons other than
current shareholders, $6,675; compensation to underwriters $0; compensation to
dealers, $4,765; compensation to sales personnel, $11,660; interest, carrying or
other financing charges $0; seminars and meetings, $1,191; travel and
entertainment, $1,170; general and administrative, $6,932; telephone, $357; and
occupancy and equipment rental, $909.
During the fiscal year ended December 31, 1999, Ivy European
Opportunities Fund paid IMDI $2,343 pursuant to its Class A plan. During the
fiscal year ended December 31, 1999 Ivy European Opportunities Fund paid IMDI
$4,903 pursuant to its Class B plan. During the fiscal year ended December 31,
1999, the Fund paid IMDI $4,338 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy European Opportunities
Fund: advertising, $87; printing and mailing of prospectuses to persons OTHER
than current shareholders, $17,859; compensation to underwriters $0;
compensation to dealers, $2,323; compensation to sales personnel, $8,327;
interest, carrying or other financing charges $0; seminars and meetings, $581;
travel and entertainment, $853; general and administrative, $4,775; telephone,
$253; and occupancy and equipment rental, $621.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy European Opportunities
fund: advertising, $40; printing and mailing of prospectuses to persons other
than current shareholders, $8,232; compensation to underwriters $0; compensation
to dealers, $1,045; compensation to sales personnel, $3,838; interest, carrying
or other financing charges $0; seminars and meetings, $262; travel and
entertainment, $393; general and administrative, $2,201; telephone, $117; and
occupancy and equipment rental, $286.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy European Opportunities
fund: advertising, $42; printing and mailing of prospectuses to persons other
than current shareholders, $8,646; compensation to underwriters $0; compensation
to dealers, $6,914; compensation to sales personnel, $4,032; interest, carrying
or other financing charges $0; seminars and meetings, $1,728; travel and
entertainment, $413; general and administrative, $2,312; telephone, $123; and
occupancy and equipment rental, $300.
During the fiscal year ended December 31, 1999, Ivy Global Fund paid
IMDI $31,419 pursuant to its Class A plan. During the fiscal year ended December
31, 1999 Ivy Global Fund paid IMDI $70,526 pursuant to its Class B plan. During
the fiscal year ended December 31, 1999, the Fund paid IMDI $3,272 pursuant to
its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $6,262; compensation to underwriters $0; compensation to dealers,
$4,993; compensation to sales personnel, $45,588; interest, carrying or other
financing charges $0; seminars and meetings, $1,248; travel and entertainment,
$4,554; general and administrative, $27,992; telephone, $1,412; and occupancy
and equipment rental, $3,674.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $3,618; compensation to underwriters $0; compensation to dealers,
$6,087; compensation to sales personnel, $26,136; interest, carrying or other
financing charges $0; seminars and meetings, $1,521; travel and entertainment,
$2,618; general and administrative, $15,924; telephone, $808; and occupancy and
equipment rental, $2,088.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $163; compensation to underwriters $0; compensation to dealers,
$420; compensation to sales personnel, $1,187; interest, carrying or other
financing charges $0; seminars and meetings, $105; travel and entertainment,
$118; general and administrative, $738; telephone, $37; and occupancy and
equipment rental, $97.
During the fiscal year ended December 31, 1999, Ivy Global Natural
Resources Fund paid IMDI $11,668 pursuant to its Class A plan. During the fiscal
year ended December 31, 1999, Ivy Global Natural Resources Fund paid IMDI
$22,713 pursuant to its Class B plan. During the fiscal year ended December 31,
1999, the Fund paid IMDI $2,446 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Natural Resources
Fund: advertising, $96; printing and mailing of prospectuses to persons OTHER
than current shareholders, $4,463; compensation to underwriters $0; compensation
to dealers, $2,493; compensation to sales personnel, $18,073; interest, carrying
or other financing charges $0; seminars and meetings, $624; travel and
entertainment, $1,841; general and administrative, $10,553; telephone, $552; and
occupancy and equipment rental, $1,376.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Natural Resources
Fund: advertising, $1; printing and mailing of prospectuses to persons OTHER
than current shareholders, $2,123; compensation to underwriters $0; compensation
to dealers, $3,817; compensation to sales personnel, $8,600; interest, carrying
or other financing charges $0; seminars and meetings, $955; travel and
entertainment, $869; general and administrative, $5,117; telephone, $265; and
occupancy and equipment rental, $669.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Natural Resources
Fund: advertising, $6; printing and mailing of prospectuses to persons OTHER
than current shareholders, $243; compensation to underwriters $0; compensation
to dealers, $486; compensation to sales personnel, $993; interest, carrying or
other financing charges $0; seminars and meetings, $121; travel and
entertainment, $102; general and administrative, $576; telephone, $30; and
occupancy and equipment rental, $75.
During the fiscal year ended December 31, 1999, Ivy Global Science &
Technology Fund paid IMDI $48,884 pursuant to its Class A plan. During the
fiscal year ended December 31, 1999 Ivy Global Science & Technology Fund paid
IMDI $168,658 pursuant to its Class B plan. During the fiscal year ended
December 31, 1999, the Fund paid IMDI $101,399 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Global Science & Technology
Fund: advertising, $106; printing and mailing of prospectuses to PERSONS OTHER
than current shareholders, $15,429; compensation to underwriters $0;
compensation to dealers, $11,953; compensation to sales personnel, $76,114;
interest, carrying or other financing charges $0; seminars and meetings, $2,988;
travel and entertainment, $7,636; general and administrative, $45,221;
telephone, $2,336; and occupancy and equipment rental, $5,932.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Global Science & Technology
Fund: advertising, $241; printing and mailing of prospectuses to PERSONS OTHER
than current shareholders, $13,846; compensation to underwriters $0;
compensation to dealers, $36,551; compensation to sales personnel, $66,530;
interest, carrying or other financing charges $0; seminars and meetings, $9,137;
travel and entertainment, $6,686; general and administrative, $39,226;
telephone, $2,037; and occupancy and equipment rental, $5,142.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Global Science & Technology
Fund: advertising, $23; printing and mailing of prospectuses to persons OTHER
than current shareholders, $7,805; compensation to underwriters $0; compensation
to dealers, $24,635; compensation to sales personnel, $38,841; interest,
carrying or other financing charges $0; seminars and meetings, $6,158; travel
and entertainment, $3,895; general and administrative, $23,136; telephone,
$1,193; and occupancy and equipment rental, $3,034.
During the fiscal year ended December 31, 1999, Ivy International Fund
II paid IMDI $70,498 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy International Fund II paid IMDI $843,423 pursuant to its
Class B plan. During the fiscal year ended December 31, 1999, the Fund paid IMDI
$396,869 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy International Fund II:
advertising, $0; printing and mailing of prospectuses to persons other THAN
current shareholders, $12,682; compensation to underwriters $0; compensation to
dealers, $13,212; compensation to sales personnel, $104,669; interest, carrying
or other financing documents $0; seminars and meetings, $3,303; travel and
entertainment, $10,515; general and administrative, $62,855; telephone, $3,224;
and occupancy and equipment rental, $8,234.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy International Fund II:
advertising, $0; printing and mailing of prospectuses to persons other THAN
current shareholders, $37,720; compensation to underwriters $0; compensation to
dealers, $119,177; compensation to sales personnel, $312,137; interest, carrying
or other financing charges $0; seminars and meetings, $29,794; travel and
entertainment, $31,221; general and administrative, $188,124; telephone, $9,615;
and occupancy and equipment rental, $24,690.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy International Fund II:
advertising, $0; printing and mailing of prospectuses to persons other THAN
current shareholders, $17,620; compensation to underwriters $0; compensation to
dealers, $66,236; compensation to sales personnel, $146,205; interest, carrying
or other financing charges $0; seminars and meetings, $16,559; travel and
entertainment, $14,619; general and administrative, $88,436; telephone, $4,509;
and occupancy and equipment rental, $11,607.
During the fiscal year ended December 31, 1999, Ivy International Small
Companies Fund paid IMDI $2,255 pursuant to its Class A plan. During the fiscal
year ended December 31, 1999, Ivy International Small Companies Fund paid IMDI
$10,075 pursuant to its Class B plan. During the fiscal year ended December 31,
1998, the Fund paid IMDI $8,988 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy International Small
companies fund: advertising, $0; printing and mailing of prospectuses to
persons other than current shareholders, $3,397; compensation to underwriters
$0; compensation to dealers, $417; compensation to sales personnel, $3,443;
interest, carrying or other financing charges $0; seminars and meetings, $105;
travel and entertainment, $344; general and administrative, $2,083; telephone,
$106; and occupancy and equipment rental, $273.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy International Small
Companies Fund: advertising, $0; printing and mailing of prospectuses to
persons other than current shareholders, $3,763; compensation to underwriters
$0; compensation to dealers, $1,169; compensation to sales personnel, $3,865;
interest, carrying or other financing charges $0; seminars and meetings, $292;
travel and entertainment, $388; general and administrative, $2,333; telephone,
$120; and occupancy and equipment rental, $305.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy International Small
Companies Fund: advertising, $0; printing and mailing of prospectuses to
persons other than current shareholders, $3,868; compensation to underwriters
$0; compensation to dealers, $1,218; compensation to sales personnel, $3,447;
interest, carrying or other financing charges $0; seminars and meetings, $305;
travel and entertainment, $346; general and administrative, $2,117; telephone,
$107; and occupancy and equipment rental, $277.
During the fiscal year ended December 31, 1999, Ivy Pan-Europe Fund
paid IMDI $4,507 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy Pan-Europe Fund paid IMDI $32,101 pursuant to its Class B
plan. During the fiscal year ended December 31, 1999, the Fund paid IMDI $6,009
pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Pan-Europe Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $1,660; compensation to underwriters $0; compensation to
dealers, $774; compensation to sales personnel, $6,743; interest, carrying or
other financing charges $0; seminars and meetings, $194; travel and
entertainment, $674; general and administrative, $4,101; telephone, $210; and
occupancy and equipment rental, $538.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Pan-Europe Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
Current shareholders, $3,879; compensation to underwriters $0; compensation to
dealers, $4,370; compensation to sales personnel, $11,843; interest, carrying or
other financing charges $0; seminars and meetings, $1,093; travel and
entertainment, $1,175; general and administrative, $7,124; telephone, $363; and
occupancy and equipment rental, $937.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Pan-Europe Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $497; compensation to underwriters $0; compensation to
dealers, $587; compensation to sales personnel, $2,130; interest, carrying or
other financing charges $0; seminars and meetings, $147; travel and
entertainment, $211; general and administrative, $1,318; telephone, $65; and
occupancy and equipment rental, $174.
During the fiscal year ended December 31, 1999, Ivy South America Fund
paid IMDI $3,682 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy South America Fund paid IMDI $9,447 pursuant to its Class
B plan. During the fiscal year ended December 31, 1999, the Fund paid IMDI
$1,269 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy South America Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $3,483; compensation to underwriters $0; compensation to
dealers, $554; compensation to sales personnel, $5,483; interest, carrying or
other financing charges $0; seminars and meetings, $139; travel and
entertainment, $555; general and administrative, $3,407; telephone, $171; and
occupancy and equipment rental, $445.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy South America Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $2,360; compensation to underwriters $0; compensation to
dealers, $1,023; compensation to sales personnel, $3,639; interest, carrying or
other financing charges $0; seminars and meetings, $256; travel and
entertainment, $369; general and administrative, $2,244; telephone, $114; and
occupancy and equipment rental, $293.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy South America Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $278; compensation to underwriters $0; compensation to
dealers, $115; compensation to sales personnel, $443; interest, carrying or
other financing charges $0; seminars and meetings, $28; travel and
entertainment, $44; general and administrative, $276; telephone, $14; and
occupancy and equipment rental, $36.
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, 1999, Ivy Asia Pacific Fund
paid MIMI $20,305 under the agreement.
During the fiscal year ended December 31, 1999, Ivy China Region Fund
paid MIMI $36,086 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Developing Markets
Fund paid MIMI $35,656 under the agreement.
During the fiscal year ended December 31, 1999, Ivy European
Opportunities Fund paid MIMI $11,488 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Fund paid
MIMI $36,499 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Natural
Resources Fund paid MIMI $23,905 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Science &
Technology Fund paid MIMI $57,838 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International Fund
II paid MIMI $102,828 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International Small
Companies Fund paid MIMI $20,669 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Pan-Europe Fund
paid MIMI $20,273 under the agreement.
During the fiscal year ended December 31, 1999, Ivy South America Fund
paid MIMI $20,026 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 LOCATED AT VIA MIZNER FINANCIAL PLAZA, STE.
300, 700 S. FEDERAL HWY., BOCA RATON, FLORIDA, 33432, 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, 1999 for Ivy Asia
Pacific Fund totaled $22,560. Such fees and expenses for the fiscal year ended
December 31, 1999 for Ivy China Region Fund totaled $98,352. Such fees and
expenses for the fiscal year ended December 31, 1999 for Ivy Developing Markets
Fund totaled $68,986. Such fees and expenses for the fiscal year ended December
31, 1999 for Ivy European Opportunities Fund totaled $1,888. Such fees and
expenses for the fiscal year ended December 31, 1999 for Ivy Global Fund totaled
$64,932. Such fees and expenses for the fiscal year ended December 31, 1999 for
Ivy Global Natural Resources Fund totaled $38,990. Such fees and expenses for
the fiscal year ended December 31, 1999 for Ivy Global Science & Technology Fund
totaled $93,208. Such fees and expenses for the fiscal year ended December 31,
1999 for Ivy International Fund II totaled $412,362. Such fees and expenses for
the fiscal year ended December 31, 1999 for Ivy International Small Companies
Fund totaled $10,849. Such fees and expenses for the fiscal year ended December
31, 1999 for Ivy Pan-Europe Fund totaled $17,141. Such fees and expenses for the
fiscal year ended December 31, 1999 for Ivy South America Fund totaled $16,948.
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, 1999 for Ivy Asia Pacific Fund totaled $7,272. Such fees for the
fiscal year ended December 31, 1999 for Ivy China Region Fund totaled $19,179.
Such fees for the fiscal year ended December 31, 1999 for Ivy Developing Markets
Fund totaled $15,277. Such fees for the fiscal year ended December 31, 1999 for
Ivy European Opportunities Fund totaled $2,774. Such fees for the fiscal year
ended December 31, 1999 for Ivy Global Fund totaled $20,271. Such fees for the
fiscal year ended December 31, 1999 for Ivy Global Natural Resources Fund
totaled $7,197. Such fees for the fiscal year ended December 31, 1999 for Ivy
Global Science & Technology Fund totaled $46,609. Such fees for the fiscal year
ended December 31, 1999 for Ivy International Fund II totaled $153,311. Such
fees for the fiscal year ended December 31, 1999 for Ivy International Small
Companies Fund totaled $2,857. Such fees for the fiscal year ended December 31,
1999 for Ivy Pan-Europe Fund totaled $5,768. Such fees and expenses for the
fiscal year ended December 31, 1999 for Ivy South America Fund totaled $2,578.
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 located at
200 E. Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida, 33301, 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, 1997, 1998 and 1999, Ivy
Asia Pacific Fund paid brokerage commissions of $18,500, $75,104 and $18,953,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
China Region Fund paid brokerage commissions of $70,846, $112,289 and $55,717,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Developing Markets Fund paid brokerage commissions of $170,306, $83,565 and
$70,916, respectively.
During the period from commencement of operations (May 3, 1999) through
December 31, 1999, Ivy European Opportunities Fund paid brokerage commissions of
$36,908.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Fund paid brokerage commissions of $123,985, $76,661 and $83,384,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Natural Resources Fund paid brokerage commissions of $128,646, $49,752
and $78,249, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Science & Technology Fund paid brokerage commissions of $99,546, $110,302
and $106,161, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal years ended December 31, 1998 and 1999, Ivy
International Fund II paid brokerage commissions of $332,022, $225,584 and
$224,332, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
International Small Companies Fund paid brokerage commission of $14,913, $5,087
and $15,777 , respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal years ended December 31, 1998 and 1999, Ivy
Pan-Europe Fund paid brokerage commissions of $491, $11,639 and $13,069,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
South America Fund paid brokerage commissions of $17,213, $19,922 and $3,365,
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 twenty-one series, each of
which represents a fund. Pursuant to the Declaration of Trust, the Trustees may
terminate any fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. 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 Cundill Value Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next Wave Internet
Fund ] Fund, as well as Class I shares for Ivy Bond Fund, Ivy Cundill Value
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, Ivy US Blue Chip Fund and Ivy Next
Wave Internet 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 Bond Fund, Ivy Cundill Value Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy US Blue Chip Fund, Ivy US Emerging Growth Fund and Ivy
Next Wave Internet Fund (the other ten 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 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 Cundill Value Fund, Ivy
Developing Markets 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, Ivy US
Emerging Growth Fund, and Ivy Next Wave Internet 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 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 ($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
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 Cundill Value Fund, Ivy
Developing Markets 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, IVY US
EMERGING GROWTH FUND, AND IVY NEXT WAVE INTERNET 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.
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, an
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 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 are 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 (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 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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 act. This will require the
particular fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $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 quoted
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 in accordance with procedures 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. The Funds are not managed for tax-efficiency.
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 ASIA PACIFIC FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 36.76% 38.64% 42.92%
1999
Inception [#] to year (8.38)% (8.21)% (8.45)%
ended December 31, 1999:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 45.10% 43.64% 43.92%
1999
Inception [#] to year (6.54)% (7.26)% (8.45)%
ended December 31, 1999:
[*] 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, 1999 and
the one year ended December 31, 1999 would have been (11.11)% and 34.38%,
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, 1999 and
the one year ended December 31, 1999 would have been (10.29)% and 36.54%,
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, 1999 and
the one year ended December 31, 1999 would have been (10.75)% and 40.61%,
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, 199
and the one year ended December 31, 1999 would have been (9.32)% and 42.59%,
respectively.
[5] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 and the one year ended December 31, 1999 would have been (9.37)% and
41.54%, 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,
1999 and the one year ended December 31, 1999 would have been (10.75)% and
41.61%, respectively.
IVY CHINA REGION FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 38.28% 40.33% 44.41%
1999
Five years ended .97% 1.02% N/A
December 31, 1999
Inception [#] to year (1.48)% (1.29)% (.71)%
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 46.72% 45.33% 45.41%
1999
Five years ended 2.18% 1.40% N/A
December 31, 1999
Inception [#] to year (.53)% (1.29)% (.71)%
ended December 31,
1999[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 (and Class A and Class B shares of
the Fund) was October 22, 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, 1999 and
the one year and five years ended December 31, 1999 would have been (1.95)%,
37.38%, and .50%, 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, 1999 and
the one year and five years ended December 31, 1999 would have been (1.74)%,
39.38%, and .56%, 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, 1999 and
the one year ended December 31, 1999 would have been (1.21)% and 43.27%
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, 1999.)
[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,
1999 and the one year and five years ended December 31, 1999 would have been
(1.01)%, 45.77%, and 1.70%, 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,
1999 and the one year and five years ended December 31, 1999 would have been
(1.74)%, 44.38%, and .94%, 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,
1999 and the one year ended December 31, 1999 would have been (1.21)% and
44.27%, 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, 1999.)
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY DEVELOPING MARKETS FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 38.27% 40.82% 44.84%
1999:
Five years ended 1.07% 1.16% N/A
December 31, 1999
Inception [#] to year (1.76)% (1.53)% (3.13)%
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 46.70% 45.82% 45.84%
1999:
Five years ended 2.28% 1.54% N/A
December 31, 1999
Inception [#] to year (.63)% (1.34)% (2.95)%
ended December 31,
1999[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, 1999 and
the one year and five years ended December 31, 1999 would have been (3.41)%,
36.74%, and (.29)%, 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, 1999 and
the one year and five years ended December 31, 1999 would have been (1.72)%,
39.39%, and (.16)%, 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, 1999 and
the one year ended December 31, 1998 would have been (2.33)% and 43.42%,
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,
1999 and the one year and five years ended December 31, 1999 would have been
(2.29)%, 45.09%, and .90%, 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,
1999 and the one year and five years ended December 31, 1999 would have been
(1.72)%, 44.39%, and .22%, 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,
1999 and the one year ended December 31, 1999 would have been (2.33)% and
44.42%, respectively.
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY EUROPEAN OPPORTUNITIES FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Inception [#] to year 197.43% 204.41% 50.80% N/A
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Inception [#] to year 215.58% 209.41% 51.80% N/A
ended December 31,
1999[8]:
[*] 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 May 3, 1999.
[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, 1999 would
have been 196.35%.
[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, 1999 would
have been 203.51%.
[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, 1999 would
have been 50.43%.
[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,
1999 would have been 214.44%.
[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,
1999 would have been 208.51%.
[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,
1999 would have been 51.43%.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
<PAGE>
IVY GLOBAL FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 19.23% 20.31% 24.24%
1999
Five years ended 9.01% 9.15% N/A
December 31, 1999
Inception [#] to year 8.88% 7.70% 6.28%
ended December 31,
1999[8]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 26.51% 25.31% 25.24%
1999
Five years ended 10.31% 9.43% N/A
December 31, 1999
Inception [#] to year 9.63% 7.82% 6.28%
ended December 31,
1999[8]:
[*] 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, 1999 and
the one and five year periods ended December 31, 1999 would have been 8.18%,
18.39%, and 8.71%, 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, 1999 and
the five year period ended December 31, 1999 would have been 7.46%, 19.54%, and
8.88%, 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, 1999 and
the one year period ended December 31, 1999 would have been 5.89% and 23.21%,
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, 1999.)
[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,
1999 and the one and five year periods ended December 31, 1999 would have been
8.92%, 25.62%, and 10.00%, 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,
1999 and the one and five year periods ended December 31, 1999 would have been
7.58%, 25.54%, and 9.16%, 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,
1999 and the one year period ended December 31, 1999 would have been 5.89% and
24.21%, 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, 1999.)
[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, 32.87% 34.87% 37.97%
1999:
Inception [#] to year .13% .44% .82%
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 40.98% 39.87% 38.97%
1999:
Inception [#] to year 2.13% 1.42% .82%
ended December 31,
1999[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, 1999 and
the one year ended December 31, 1999 would have been (2.24)% and 29.80%,
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, 1999 and
the one year ended December 31, 1999 would have been (1.89)% and 31.62%,
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, 1999 and
the one year ended December 31, 1999 would have been (2.34)% and 34.69%,
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,
1999 and the one year ended December 31, 1999 would have been (.28)% and 37.74%,
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,
1999 and the one year ended December 31, 1999 would have been (.93)% and 36.62%,
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,
1999 and the one year ended December 31, 1999 would have been (2.34)% and
35.69%, respectively.
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31, 109.76% 115.82% 119.98% N/A
1999
Inception [#] to year 59.35% 60.79% 61.17% N/A
ended December 31,
1999: [8]
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31, 122.56% 120.82% 120.98% N/A
1999
Inception [#] to year 62.03% 60.98% 61.17% N/A
ended December 31,
1999: [8]
[*] 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 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, 1999 and
the one year ended December 31, 1999 would have been 59.27% and 109.76%,
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, 1999 and
the one year ended December 31, 1999 would have been 60.75% and 115.82%,
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, 1999 and
the one year ended December 31, 1999 would have been 61.22% and 119.98%,
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,
1999 and the one year ended December 31, 1999 would have been 61.95% and
122.56%, 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,
1999 and the one year ended December 31, 1999 would have been 60.79% and
120.82%, 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,
1999 and the one year ended December 31, 1999 would have been 61.22% and
120.98%, respectively.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY INTERNATIONAL FUND II
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31, 20.44% 21.81% 25.91% N/A
1999
Inception [#] to year 5.51% 6.04% 7.08% N/A
ended December 31,
1999[8]:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31, 27.79% 26.81% 26.91% N/A
1999
Inception [#] to year 7.92% 7.07% 7.08% N/A
ended December 31,
1999[8]:
[*] 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, 1999 and
the one year ended December 31, 1999 would have been 5.42% and 20.33%,
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, 1999 and
the one year ended December 31, 1999 would have been 5.90% and 21.58%,
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, 1999 and
the one year ended December 31, 1999 would have been 6.94% and 25.66%,
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,
1999 and the one year ended December 31, 1999 would have been 7.81% and 27.67%,
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,
1999 and the one year ended December 31, 1999 would have been 6.93% and 26.58%,
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,
1999 and the one year ended December 31, 1999 would have been 6.94% and 26.66%
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[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31, 31.43% 33.24% 37.36% N/A
1999
Inception [#] to year 6.58% 6.98% 7.92% N/A
ended December 31, 1999:
NON-STANDARDIZED RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended December 31, 39.45% 38.24% 38.36% N/A
1999
Inception [#] to year 8.70% 7.84% 7.92% N/A
ended December 31, 1999:
[*] 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, 1999 and
the one year ended December 31, 1999 would have been 2.19% and 22.96%,
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, 1999 and
the one year ended December 31, 1999 would have been 2.85% and 24.70%,
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, 1999 and
the one year ended December 31, 1999 would have been 3.28% and 28.61%,
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,
1999 and the one year ended December 31, 1999 would have been 4.24% and 30.52%,
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,
1999 and the one year ended December 31, 1999 would have been 3.69% and 29.70%,
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,
1999 and the one year ended December 31, 1999 would have been 3.28% and 29.61%,
respectively.
IVY PAN-EUROPE FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 11.48% 12.37% 16.23%
1999:
Inception [#] to year 9.01% 9.78% 9.97%
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 18.29% 17.37% 17.23%
1999:
Inception [#] to year 11.50% 10.77% 9.97%
ended December 31,
1999[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
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, 1999 and
the one year ended December 31, 1999 would have been 2.99% and 8.76%,
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, 1999 and
the one year ended December 31, 1999 would have been 5.88% and 9.38%,
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, 1999 and
the one year ended December 31, 1999 would have been 7.04% and 10.99%.
[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,
1999 and the one year ended December 31, 1999 would have been 5.36% and 15.41%,
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,
1999 and the one year ended December 31, 1999 would have been 6.82% and 14.38%,
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,
1999 and the one year ended December 31, 1999 would have been 7.04% and 11.99%.
[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
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3]
Year ended December 31, 37.97% 40.29% 44.59%
1999
Five years ended (.61)% (.61)% N/A
December 31, 1999
Inception [#] to year (3.90)% (3.74)% 1.15%
ended December 31,
1999[7]:
NON-STANDARDIZED RETURN[**]
CLASS A[4] CLASS B[5] CLASS C[6]
Year ended December 31, 46.39% 45.29% 45.59%
1999
Five years ended .58% (.20)% N/A
December 31, 1999
Inception [#] to year (2.80)% (3.55)% 1.15%
ended December 31,
1999[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 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, 1999 and
the one year ended December 31, 1999 would have been (8.64)%, 27.06%, and
(5.22)%, 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, 1999 and
the one year ended December 31, 1999 would have been (8.17)%, 30.34%, and
(4.99)%, 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, 1999 and
the one year ended December 31, 1999 would have been (1.50)% and 39.25%,
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,
1999 and the one year ended December 31, 1999 would have been (7.58)%, 34.91%,
and (4.08)%, 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,
1999 and the one year ended December 31, 1999 would have been (7.99)%, 35.3%,
and (4.60)%, 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,
1999 and the one year ended December 31, 1999 would have been (1.50)% and
40.25%, respectively.
[7] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
<PAGE>
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 ASIA PACIFIC FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 36.76% (23.04)%
Class B 38.64% (22.60)%
Class C 42.92% (22.03)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 45.10% (18.34)%
Class B 43.64% (20.21)%
Class C 43.92% (8.45)%
[*] 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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 38.28% 4.97% (8.81)%
Class B 40.33% 5.21% (7.69)%
Class C 44.41% N/A (2.59)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 46.72% 11.37% (3.25)%
Class B 45.33% 7.21% (7.69)%
Class C 45.41% N/A (2.59)%
[*] 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 MARKETS FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 38.27% 5.48% (8.76)%
Class B 40.82% 5.94% (7.67)%
Class C 44.84% N/A (6.18)%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 46.70% 11.91% (3.20)%
Class B 45.82% 7.94% (6.74)%
Class C 45.84% N/A (6.74)%
[*] 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 EUROPEAN OPPORTUNITIES FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has been assessed.
SINCE
INCEPTION[*]
Class A 197.43%
Class B 204.41%
Class C 50.80%
Class I N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
SINCE
INCEPTION[*]
Class A 215.58%
Class B 209.41%
Class C 51.80%
Class I N/A
[*] The inception date for the Fund was May 3, 1999.
IVY GLOBAL FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION
Class A 19.23% 53.95% 109.85%
Class B 20.31% N/A 53.21%
Class C 24.24% N/A 25.05%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 26.51% 63.34% 122.65%
Class B 25.31% N/A 54.21%
Class C 25.24% N/A 25.05%
[*] 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, 1999, assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 32.87% .40%
Class B 34.87% 1.32%
Class C 37.97% 2.47%
The following table summarizes the calculation of Cumulative Total
Return for Ivy Global Natural Resources Fund for the periods indicated through
December 31, 1999, assuming the maximum 5.75% sales charge has not been
assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 40.98% 6.53%
Class B 39.87% 4.32%
Class C 38.97% 2.47%
[*] 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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 109.76% 396.70%
Class B 115.82% 413.33%
Class C 119.98% 417.41%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 122.56% 427.00%
Class B 120.82% 415.33%
Class C 120.98% 417.41%
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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 20.44% 15.21%
Class B 21.81% 16.74%
Class C 25.91% 19.77%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 27.79% 22.24%
Class B 26.81% 19.74%
Class C 26.91% 19.77%
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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 31.43% 21.00%
CLASS B 33.24% 22.46%
CLASS C 37.36% 25.75%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION [*]
Class A 39.45% 28.38%
CLASS B 33.24% 25.46%
CLASS C 37.36% 25.75%
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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 11.48% 25.57%
Class B 12.37% 27.93%
Class C 16.23% 20.03%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 18.29% 33.24%
Class B 17.37% 30.93%
Class C 17.23% 20.03%
- ---------------------------
[*] 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.
IVY SOUTH AMERICA FUND
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 37.97% (2.99)% (18.61)%
Class B 40.29% (3.00)% (17.88)%
Class C 44.59% N/A 4.27%
The following table summarizes the calculation of Cumulative Total
Return for the periods indicated through December 31, 1999, assuming the maximum
5.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 46.39% 2.93% (13.64)%
Class B 45.29% (1.02)% (17.05)%
Class C 45.59% N/A 4.27%
[*] 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 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 portfolio of investments as of December 31, 1999, Statement
of Assets and Liabilities as of December 31, 1999, statement of operations FOR
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 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 MARKETS 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 PAN-EUROPE FUND
IVY SOUTH AMERICA FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
May 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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 Markets 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 Pan-Europe
Fund and Ivy South America Fund (each a "Fund"). The other ten 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 1, 2000 (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.
Each Fund's Annual Report to shareholders, dated December 31, 1999
(each an "Annual Report"), is incorporated by reference into this SAI. Each
Fund's Annual Report may 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>
-iv-
-i-
TABLE OF CONTENTS
Page #
GENERAL INFORMATION............................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS....................................1
IVY ASIA PACIFIC FUND.................................................2
INVESTMENT RESTRICTIONS FOR IVY ASIA PACIFIC FUND.....................3
INVESTMENT RESTRICTIONS FOR IVY ASIA PACIFIC FUND..............................3
ADDITIONAL RESTRICTIONS........................................................4
IVY CHINA REGION FUND.................................................5
INVESTMENT RESTRICTIONS FOR IVY CHINA REGION FUND.....................6
ADDITIONAL RESTRICTIONS........................................................7
IVY DEVELOPING MARKETS FUND...........................................8
IVY DEVELOPING MARKETS FUND...........................................8
INVESTMENT RESTRICTIONS FOR
IVY DEVELOPING MARKETS FUND..........................................9
INVESTMENT RESTRICTIONS FOR IVY DEVELOPING MARKETS FUND..............9
ADDITIONAL RESTRICTIONS......................................................10
IVY EUROPEAN OPPORTUNITIES FUND.....................................11
INVESTMENT RESTRICTIONS FOR
IVY EUROPEAN OPPORTUNITIES FUND.....................................13
ADDITIONAL RESTRICTIONS......................................................14
IVY GLOBAL FUND.....................................................15
INVESTMENT RESTRICTIONS FOR IVY GLOBAL FUND.........................16
ADDITIONAL RESTRICTIONS......................................................17
IVY GLOBAL NATURAL RESOURCES FUND...................................18
INVESTMENT RESTRICTIONS FOR IVY GLOBAL NATURAL RESOURCES FUND..... 18
ADDITIONAL RESTRICTIONS......................................................19
IVY GLOBAL SCIENCE & TECHNOLOGY FUND................................21
INVESTMENT RESTRICTIONS FOR
IVY GLOBAL SCIENCE & TECHNOLOGY FUND................................22
ADDITIONAL RESTRICTIONS......................................................23
IVY INTERNATIONAL FUND II...........................................24
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL FUND II...............25
ADDITIONAL RESTRICTIONS......................................................26
IVY INTERNATIONAL SMALL COMPANIES FUND..............................27
INVESTMENT RESTRICTIONS FOR
IVY INTERNATIONAL SMALL COMPANIES FUND..............................28
ADDITIONAL RESTRICTIONS......................................................29
IVY PAN-EUROPE FUND.................................................30
INVESTMENT RESTRICTIONS FOR IVY PAN-EUROPE FUND.....................31
ADDITIONAL RESTRICTIONS......................................................32
IVY SOUTH AMERICA FUND..............................................33
INVESTMENT RESTRICTIONS FOR IVY SOUTH AMERICA FUND..................34
ADDITIONAL RESTRICTIONS......................................................35
EQUITY SECURITIES...................................................36
CONVERTIBLE SECURITIES..............................................37
SMALL COMPANIES.....................................................37
INITIAL PUBLIC OFFERINGS............................................38
NATURAL RESOURCES AND PHYSICAL COMMODITIES..........................38
DEBT SECURITIES.....................................................39
IN GENERAL.................................................39
INVESTMENT-GRADE DEBT SECURITIES...........................39
LOW-RATED DEBT SECURITIES..................................39
U.S. GOVERNMENT SECURITIES.................................41
ZERO COUPON BONDS..........................................41
FIRM COMMITMENT AGREEMENTS AND
"WHEN-ISSUED" SECURITIES...................................42
ILLIQUID SECURITIES.................................................42
FOREIGN SECURITIES..................................................43
DEPOSITORY RECEIPTS.................................................44
EMERGING MARKETS....................................................44
SECURITIES ISSUED IN ASIA-PACIFIC COUNTRIES.........................45
THE CHINA REGION....................................................46
SOUTH AMERICAN SECURITIES...........................................47
FOREIGN SOVEREIGN DEBT OBLIGATIONS.........................49
BRADY BONDS................................................49
FOREIGN CURRENCIES..................................................50
FOREIGN CURRENCY EXCHANGE TRANSACTIONS..............................50
OTHER INVESTMENT COMPANIES..........................................51
REPURCHASE AGREEMENTS...............................................52
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS...................52
COMMERCIAL PAPER....................................................52
BORROWING...........................................................53
WARRANTS 53
REAL ESTATE INVESTMENT TRUSTS (REITS)...............................53
OPTIONS TRANSACTIONS................................................53
IN GENERAL.................................................53
WRITING OPTIONS ON INDIVIDUAL SECURITIES...................54
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES................55
RISKS OF OPTIONS TRANSACTIONS..............................55
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS..................56
IN GENERAL.................................................57
FOREIGN CURRENCY FUTURES CONTRACTS
AND RELATED OPTIONS........................................58
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS..........59
SECURITIES INDEX FUTURES CONTRACTS..................................60
RISKS OF SECURITIES INDEX FUTURES..........................60
COMBINED TRANSACTIONS......................................62
PORTFOLIO TURNOVER...........................................................62
TRUSTEES AND OFFICERS........................................................62
CLASS A.............................................................68
CLASS B 70
CLASS C 72
ADVISOR CLASS.......................................................75
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI............................78
INVESTMENT ADVISORY AND OTHER SERVICES.......................................78
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES................78
DISTRIBUTION SERVICES...............................................82
RULE 18F-3 PLAN............................................82
CUSTODIAN...........................................................83
FUND ACCOUNTING SERVICES............................................83
TRANSFER AGENT AND DIVIDEND PAYING AGENT............................84
ADMINISTRATOR.......................................................84
AUDITORS 85
BROKERAGE ALLOCATION.........................................................85
CAPITALIZATION AND VOTING RIGHTS.............................................87
SPECIAL RIGHTS AND PRIVILEGES................................................88
AUTOMATIC INVESTMENT METHOD.........................................89
EXCHANGE OF SHARES..................................................89
RETIREMENT PLANS....................................................90
INDIVIDUAL RETIREMENT ACCOUNTS.............................90
ROTH IRAS..................................................91
QUALIFIED PLANS............................................92
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE OA.93
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS...................93
SIMPLE PLANS...............................................93
SYSTEMATIC WITHDRAWAL PLAN..........................................94
GROUP SYSTEMATIC INVESTMENT PROGRAM.................................94
REDEMPTIONS..................................................................95
NET ASSET VALUE..............................................................96
TAXATION 97
OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS...................................................98
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES..............99
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES.................100
DEBT SECURITIES ACQUIRED AT A DISCOUNT.............................100
DISTRIBUTIONS......................................................101
DISPOSITION OF SHARES..............................................102
FOREIGN WITHHOLDING TAXES..........................................102
BACKUP WITHHOLDING.................................................103
PERFORMANCE INFORMATION.....................................................104
AVERAGE ANNUAL TOTAL RETURN........................................104
CUMULATIVE TOTAL RETURN............................................105
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION..............106
FINANCIAL STATEMENTS........................................................107
APPENDIX A..................................................................108
<PAGE>
8
GENERAL INFORMATION
Each Fund (except Ivy South America Fund) is organized as a separate,
diversified portfolio of the Trust, an open-end management investment company
organized as a Massachusetts business trust on December 21, 1983. Ivy South
America Fund is organized as a separate, non-diversified portfolio of the Trust.
Ivy Asia Pacific Fund commenced operations on January 1, 1997. Ivy China Region
Fund commenced operations (Class A and Class B shares) on October 22, 1993;
Class C commenced operations on April 30, 1996. Ivy Developing Markets Fund
commenced operations (Class A and Class B shares) on November 1, 1994; Class C
commenced operations on April 30, 1996. Ivy European Opportunities Fund
commenced operations on May 3, 1999. Ivy Global Fund commenced operations (Class
A shares) on April 18, 1991; Class B commenced operations on April 1, 1994; and
Class C commenced operations on April 30, 1996. Ivy Global Natural Resources
Fund and Ivy International Small Companies Fund commenced operations on January
1, 1997. Ivy Global Science & Technology Fund commenced operations on July 22,
1996. Ivy International Fund II and Ivy Pan-Europe Fund (Class A and Class B
shares) commenced operations on May 13, 1997. Class C shares of Ivy Pan-Europe
Fund were first issued on January 28, 1998. Ivy South America Fund commenced
operations (Class A and Class B shares) on November 1, 1994; Class C commenced
operations on April 30, 1996.
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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, 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 a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
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 SAI 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. As a fundamental policy, the Fund does not 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 & Poor's Ratings Services ("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
from banks in accordance with the provisions of the 1940 Act, 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 in other investment companies that invest in
securities issued in Asia-Pacific countries in accordance with the provisions of
the 1940 Act, 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. The Fund may write or buy straddles or
spreads. 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 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund will not borrow money, except as permitted
under the Investment Company Act of 1940, as
amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time
to time.
(ii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time
to time.
(iii) The Fund will not engage in the business of
underwriting securities issued by others, except to
the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of
portfolio securities.
(iv) The Fund will not purchase or sell real estate (which
term does not include securities of companies that
deal in real estate or mortgages or investments
secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired
as a result of the Fund's ownership of securities.
(v) The Fund will not purchase physical commodities or
contracts relating to physical commodities, although
the Fund may invest in commodities futures contracts
and options thereon to the extent permitted by the
Prospectus and this SAI.
(vi) The Fund will not make loans to other persons, except
(a) loans of portfolio securities, and (b) to the
extent that entry into repurchase agreements and the
purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment
objective and policies may be deemed to be loans.
(vii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company
Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction,
from time to time.
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 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;
(ii) 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;
(iii) sell securities short, except for short sales "against the box";
(iv) borrow money, except for temporary or emergency purposes. The Fund 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" total
assets;
(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; or
(vi) 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.
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 in 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 in other
investment companies in accordance with the provisions of the 1940 Act, 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 (as defined in the 1940 Act) of a majority of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus or this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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;
(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;
(vi) 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
IVY DEVELOPING MARKETS FUND
Ivy Developing Markets 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 Markets 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 from banks in
accordance with the provisions of the 1940 Act, 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 in other investment companies in accordance with the
provisions of the 1940 Act, 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 MARKETS FUND
Ivy Developing Markets 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus or this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, Ivy Developing Markets 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;
(vi) borrow money, except for temporary or emergency purposes. The Fund 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
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 (v) 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.
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.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading. 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 or BB or below by 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 in accordance with the provisions of the 1940
Act. The Fund may also invest in other investment companies in accordance with
the provisions of the 1940 Act, and may invest 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. The Fund may also write or buy straddles or spreads.
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. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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";
(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;
(vi) 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;
(vii)make investments in securities for the purpose of exercising control
over or management of the issuer; or
(viii) invest in interests in oil, gas and/or mineral exploration or
development programs (other than securities of companies that invest
in or sponsor such programs).
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 in other investment companies in
accordance with the provisions of the 1940 Act, and may invest up to 15% of its
net assets in illiquid securities. The Fund may not 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. The Fund may also write and buy straddles and spreads.
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. The Fund
has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by its
Prospectus.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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;
(ii) purchase or sell interests in oil, gas or mineral leases (other than
securities of companies that invest in or sponsor such programs);
(iii)invest in oil, gas and/or mineral exploration or development
programs;
(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 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 any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities restricted as to disposition under the Federal securities
laws; or
(ix) purchase securities of another investment company, except in
connection with a merger, consolidation, reorganization or acquisition
of assets, and except that the Fund may invest in securities of other
investment companies subject to the restrictions in Section 12(d)(1)
of the Investment Company Act of 1940 (the "1940 Act").
The Fund does not interpret fundamental restriction (v) to prohibit
investment in real estate investment trusts.
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 from banks in accordance with the provisions of the 1940
Act, 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 in other investment
companies in accordance with the provisions of the 1940 Act, and may invest 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.
The Fund may also write or buy puts, calls, straddles or spreads.
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. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in (a)
commodities futures contracts and options thereon to the extent
permitted by the Prospectus and this SAI and (b) commodities relating
to natural resources, as described in the Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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 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;
(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 1940 Act 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) invest in interests in oil, gas and/or mineral exploration or
development programs;
(v) sell securities short, except for short sales "against the box;"
(vi) borrow money, except for temporary or emergency purposes. The Fund 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" total
assets;
(vii)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;
(viii) 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; or
(ix) make investments in securities for the purpose of exercising control
over or management of the issuer.
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 (v) 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.
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. Investments made by the Fund may include securities issued
pursuant to IPOs. The Fund may also engage in short-term trading.
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) in
other investment companies in accordance with the provisions of the 1940 Act 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. The Fund has adopted the following fundamental
investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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 or
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;
(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 emergency purposes.
(vi) purchase securities on margin;
(vii) sell securities short, except for short sales "against the box"; or
(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.
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 (v) 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.
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 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), 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 in other investment companies in accordance with the
provisions of the 1940 Act and up to 15% of its net assets in illiquid
securities.
The Fund may purchase put and call options on securities and stock
indices, provided the premium paid for such options does not exceed 5% of the
Fund's net assets. The Fund may also sell covered put options with respect to up
to 10% of the value of its net assets, and may write covered call options so
long as not more than 25% of the Fund's net assets are subject to being
purchased upon the exercise of the calls. For hedging purposes only, the Fund
may engage in transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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;
(iv) sell securities short, except for short sales, "against the box;"
(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 emergency purposes.
(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 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; or
(viii) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidations.
Ivy International Fund II will continue to interpret fundamental
investment restriction (v) 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.
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. The Fund may purchase securities issued pursuant to IPOs. The
Fund may engage in short-term trading.
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 from banks in accordance with the provisions of the 1940 Act,
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 in other investment companies in
accordance with the provisions of the 1940 Act, and may invest 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. The Fund may also write or buy straddles or spreads.
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. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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 in oil, gas and/or mineral exploration or development
programs;
(iv) 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;
(v) borrow money, except for temporary or emergency purposes. The Fund 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;
(vi) 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 1940 Act and
rules thereunder;
(vii) sell securities short, except for short sales "against the box;"
(viii) 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;
(ix) make investments in securities for the purpose of exercising control
over or management of the issuer; or
(x) 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.
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. As a fundamental policy, the Fund does not
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
from banks in accordance with the provisions of the 1940 Act, 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 in other investment companies in accordance with the provisions of the
1940 Act, and may invest 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. The Fund may also write or buy straddles or
spreads.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
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 in oil, gas and/or mineral exploration or development
programs;
(iv) 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;
(v) borrow money, except for temporary or emergency purposes. The Fund 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;
(vi) 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;
(vii) sell securities short, except for short sales "against the box";
(viii) 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 IMI, for the sale or
purchase of portfolio securities shall not be considered participation
in a joint securities trading account;
(ix) make investments in securities for the purpose of exercising control
over or management of the issuer; or
(x) 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.
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 SAI is defined
as 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. As a
fundamental restriction, the Fund will not 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 from banks in accordance with the provisions
of the 1940 Act (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 in other
investment companies in accordance with the provisions of the 1940 Act, 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 (as defined in the 1940 Act) of the
outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii)The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus or this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
The Fund will not concentrate its investments in a particular industry, as the
term "concentrate" is interpreted in connection with the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
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) borrow money, except for temporary or emergency purposes. The Fund 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" total
assets;
(vi) 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;
(vii) purchase securities on margin;
(viii) sell securities short; or
(ix) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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 and AAA by
S&P are judged to be of the best quality (i.e., capacity to pay interest and
repay principal is extremely strong). Bonds rated Aa/AA are considered to be of
high quality (i.e., capacity to pay interest and repay principal is very strong
and differs from the highest rated issues only to a small degree). Bonds rated A
are viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). 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, if so, could 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.
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 and Brazil 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.
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 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. 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 or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
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. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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.
The portfolio turnover rate for Ivy Asia Pacific Fund was significantly
higher in 1999 than it was in 1998 because of a significant increase in the
performance of the Hong Kong market in 1999. The portfolio turnover rate for Ivy
Global Natural Resources Fund was significantly higher in 1999 than it was in
1998 because of a significant increase in the sale of shares of that Fund. The
portfolio turnover rate for Ivy International Small Companies Fund was
significantly higher in 1999 than it was in 1998 because of a significant
increase in the net assets of that Fund.
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:
<TABLE>
<CAPTION>
- ---------------------------------------- --------------------------- -------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
- ---------------------------------------- --------------------------- -------------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested person" Investment Management Inc. (1995-present);
of the Trust, as defined under the Senior Vice President, Mackenzie Investment
1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present); Chairman, Broyhill
800 Hickory Blvd. Family Foundation, Inc. (1983-present); Chairman, Broyhill
Golfview Park-Box 500 Investments, Inc. (1997-present); Chairman and President,
Lenoir, NC 28645 Broyhill Investments, Inc. (1983-1997); Chairman, Broyhill
Age: 76 Timber Resources (1983-present); Management of a personal
portfolio of fixed-income and equity instruments
(1983-present); Trustee of Mackenzie Series Trust
(1988-1998); Director of The Mackenzie Funds Inc.
(1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested person" President, Mackenzie Investment Management Inc.
of the Trust, as defined under the (1996-1997); Senior Vice President and
1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998).
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
</TABLE>
<PAGE>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
*The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel Jr.,
P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares (34.67%)
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville, FL 32246,
owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares (25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE FBO
Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC Private Bus
Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370, Cooper Station
New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith For
the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607 (21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target Benefit
Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890, owned of
record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn: Russ
Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box 173736,
Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith Inc.
Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%) and
Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD 5/2/94 Martha K
Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record 10,022 shares
(6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and Prudential
Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy Shargorodsky
Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record 20,520.944 shares
(13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert M.
Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%), Salomon
Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York, NY
10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170th ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO Vytautas Sniekus, 1250 E 276th St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares (71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA FBO
Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of record
615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison Engines,
200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record 327,350.589
shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box 83084,
Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%), Harleysville
Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438, owned of record
191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great Lakes Chemical
RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S, Chicago, IL
60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark Taper
Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049, owned of
record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company FBO
Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST, International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 19,521.431 shares (73.06%), Brown Brothers Harriman & Co.
CUST International Solutions V- Aggressive Growth, Attn: Terron McGovern, 40
Water St. Boston, MA 02109, owned of record 5,387.835 shares (20.17%), Brown
Brothers Harriman & Co. CUST International Solutions II - Balanced Growth, Attn:
Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record 1,602.659
shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc., P.O.
Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares (26.19%),
NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A
01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of record
6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities Corporation Inc.
P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 5,383.304 shares
(15.85%), and Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 2,366.810 shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 32,622.646 shares (61.95%), Brown Brothers Harriman & Co.
CUST International Solutions III - Moderate Growth, Attn: Terron McGovern, 40
Water Street, Boston, MA 02109, owned of record 9,740.980 shares (18.49%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 5,243.316 shares (9.95%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 3,240.952 shares (6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot TTEE
Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton, FL
33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 35,889.863 shares (24.70%), Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 26,271.557 shares (18.08%) and Brown Brothers Harriman
& Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management Inc.
Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300,
Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as
manager and investment adviser to the other series of Ivy 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, 1998 and 1999, Ivy
Global Natural Resources Fund paid IMI fees of $32,056, $20,977 and $35,984,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses in the amount of $25,180, $147,952 and $170,530,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
the Fund paid MFC fees of $32,056, $20,977 and $35,984, 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, 1997, 1998 and 1999, Ivy
Asia Pacific Fund paid IMI fees of $10,473, $49,509 and $72,724, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, IMI reimbursed
Fund expenses of $10,473, $167,194 and $119,280, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
China Region Fund paid IMI fees of $277,601, $187,381 and $191,792,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses of $18,377, $105,095 and $125,910, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Developing Markets Fund paid IMI fees of $284,290, $156,166 and $152,772,
respectively. During the fiscal years ended December 31, 1997, 1998 and 1999,
IMI reimbursed Fund expenses of $22,860, $200,839 and $149,367, respectively.
During the period from commencement (May 3, 1999) through December 31,
1999, Ivy European Opportunities Fund paid IMI fees of $27,735. During the same
period, IMI reimbursed Fund expenses in the amount of $107,722.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Fund paid IMI fees of $383,981, $275,958 and $202,715, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $0,
$98,102 and $120,751, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Science & Technology Fund paid IMI fees of $229,616, $280,079 and
$466,093, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $0, $0 and $0, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal years ended December 31, 1998 and 1999, Ivy
International Fund II paid IMI fees of $413,862, $1,356,028 and $1,533,107,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $123,177, $186,536 and $226,984, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
International Small Companies Fund paid IMI fees of $28,799, $34,504 and
$28,729, respectively. During the same periods, IMI reimbursed Fund expenses in
the amount of $28,799, $134,787 and $178,983, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997 and the fiscal years ended December 31, 1998 and 1999, Ivy
Pan-Europe Fund paid IMI fees of $1,974, $43,978 and $57,684, respectively.
During the same periods, IMI reimbursed Fund expenses in the amount of $1,974,
$148,399 and $131,352, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
South America Fund paid IMI fees of $94,278, $53,857 and $25,779, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, IMI reimbursed
Fund expenses of $68,548, $145,687 and $155,981, 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.
With respect to all Funds other than Ivy Global Science and Technology
Fund, 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% (1.50% in the case of Ivy International Fund II) 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, 1999, Ivy Asia Pacific Fund
paid MIMI $20,305 under the agreement.
During the fiscal year ended December 31, 1999, Ivy China Region Fund
paid MIMI $36,086 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Developing Markets
Fund paid MIMI $35,656 under the agreement.
During the fiscal year ended December 31, 1999, Ivy European
Opportunities Fund paid MIMI $11,488 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Fund paid
MIMI $36,499 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Natural
Resources Fund paid MIMI $23,905 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Global Science &
Technology Fund paid MIMI $57,838 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International Fund
II paid MIMI $102,828 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International Small
Companies Fund paid MIMI $20,669 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Pan-Europe Fund
paid MIMI $20,273 under the agreement.
During the fiscal year ended December 31, 1999, Ivy South America Fund
paid MIMI $20,026 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 located at Via Mizner Financial Plaza, Suite
300, 700 S. Federal Highway, Boca Raton, Florida 33432, 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, 1999 for
Ivy Asia Pacific Fund totaled $22,560. Such fees and expenses for the fiscal
year ended December 31, 1999 for Ivy China Region Fund totaled $98,352. Such
fees and expenses for the fiscal year ended December 31, 1999 for Ivy Developing
Markets Fund totaled $68,986. Such fees and expenses for the fiscal year ended
December 31, 1999 for Ivy European Opportunities Fund totaled $1,888. Such fees
and expenses for the fiscal year ended December 31, 1999 for Ivy Global Fund
totaled $64,932. Such fees and expenses for the fiscal year ended December 31,
1999 for Ivy Global Natural Resources Fund totaled $38,990. Such fees and
expenses for the fiscal year ended December 31, 1999 for Ivy Global Science &
Technology Fund totaled $93,208. Such fees and expenses for the fiscal year
ended December 31, 1999 for Ivy International Fund II totaled $412,362. Such
fees and expenses for the fiscal year ended December 31, 1999 for Ivy
International Small Companies Fund totaled $10,849. Such fees and expenses for
the fiscal year ended December 31, 1999 for Ivy Pan-Europe Fund totaled $17,141.
Such fees and expenses for the fiscal year ended December 31, 1999 for Ivy South
America Fund totaled $16,948. 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, 1999 for Ivy Asia Pacific Fund totaled $7,272. Such fees for the
fiscal year ended December 31, 1999 for Ivy China Region Fund totaled $19,179.
Such fees for the fiscal year ended December 31, 1999 for Ivy Developing Markets
Fund totaled $15,277. Such fees for the fiscal year ended December 31, 1999 for
Ivy European Opportunities Fund totaled $2,774. Such fees for the fiscal year
ended December 31, 1999 for Ivy Global Fund totaled $20,271. Such fees for the
fiscal year ended December 31, 1999 for Ivy Global Natural Resources Fund
totaled $7,197. Such fees for the fiscal year ended December 31, 1999 for Ivy
Global Science & Technology Fund totaled $46,609. Such fees for the fiscal year
ended December 31, 1999 for Ivy International Fund II totaled $153,311. Such
fees for the fiscal year ended December 31, 1999 for Ivy International Small
Companies Fund totaled $2,857. Such fees for the fiscal year ended December 31,
1999 for Ivy Pan-Europe Fund totaled $5,768. Such fees and expenses for the
fiscal year ended December 31, 1999 for Ivy South America Fund totaled $2,578.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants located at
200 E. Las Olas Boulevard, Suite 1700, Fort Lauderdale, Florida 33301, 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, 1997, 1998 and 1999, Ivy
Asia Pacific Fund paid brokerage commissions of $18,500, $75,104 and $18,953,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
China Region Fund paid brokerage commissions of $70,846, $112,289 and $55,717,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Developing Markets Fund paid brokerage commissions of $170,306, $83,565 and
$70,916, respectively.
During the period from commencement of operations (May 3, 1999) through
December 31, 1999, Ivy European Opportunities Fund paid brokerage commissions of
$36,908.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Fund paid brokerage commissions of $123,985, $76,661 and $83,384,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Natural Resources Fund paid brokerage commissions of $128,646, $49,752
and $78,249, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Global Science & Technology Fund paid brokerage commissions of $99,546, $110,302
and $106,161, respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal years ended December 31, 1998 and 1999, Ivy
International Fund II paid brokerage commissions of $332,022, $225,584 and
$224,332, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
International Small Companies Fund paid brokerage commission of $14,913, $5,087
and $15,777 , respectively.
During the period from May 13, 1997 (commencement of operations) to
December 31, 1997, and the fiscal years ended December 31, 1998 and 1999, Ivy
Pan-Europe Fund paid brokerage commissions of $491, $11,639 and $13,069,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
South America Fund paid brokerage commissions of $17,213, $19,922 and $3,365,
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 (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. Pursuant to the Declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. The
Trustees have authorized twenty-one 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 Cundill Value Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next Wave Internet
Fund, as well as Class I shares for Ivy Bond Fund, Ivy Cundill Value 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, Ivy US Blue Chip Fund and Ivy Next
Wave Internet 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 Bond Fund, Ivy Cundill Value Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy International Strategic Bond Fund, Ivy
Money Market Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund and Ivy
Next Wave Internet Fund (the other ten 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.
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, an
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 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.
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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in 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 quoted
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 in accordance with procedures 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. The Funds are not managed for tax-efficiency.
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 figures for Ivy China Region Fund's Advisor
Class shares for the period from inception through December 31, 1999 and the
one-year period ended December 31, 1999 were 9.01% and 46.29%, respectively.
These figures reflect expense reimbursement. Without expense reimbursement, the
Standardized Return figures would have been 8.59% and 45.91%, respectively.
The Standardized Return figures for Ivy Developing Markets Fund's
Advisor Class shares for the period from inception through December 31, 1999 and
the one-year period ended December 31, 1999 were 11.13% and 47.38%,
respectively. These figures reflect expense reimbursement. Without expense
reimbursement, the Standardized Return figures would have been 10.27% and
46.57%, respectively.
The Standardized Return figures for Ivy Global Fund's Advisor Class
shares for the period from inception through December 31, 1999 and the one-year
period ended December 31, 1999 were 8.07% and 26.77%, respectively. These
figures reflect expense reimbursement. Without expense reimbursement, the
Standardized Return figures would have been 6.71% and 24.41%, respectively.
The Standardized Return figures for Ivy Global Science & Technology
Fund's Advisor Class shares for the period from inception through December 31,
1999 and the one-year period ended December 31, 1999 were 74.87% and 122.56%,
respectively.
The Standardized Return figures for Ivy International Fund II's Advisor
Class shares for the period from inception through December 31, 1999 and the
one-year period ended December 31, 1999 were 14.33% and 28.30%, respectively.
These figures reflect expense reimbursement. Without expense reimbursement, the
Standardized Return figures would have been 14.21% and 28.18%, respectively.
The Standardized Return figures for Ivy Pan-Europe Fund's Advisor Class
shares for the period from inception through December 31, 1999 and the one-year
period ended December 31, 1999 were 4.75% and 18.50%, respectively. These
figures reflect expense reimbursement. Without expense reimbursement, the
Standardized Return figures would have been 1.83% and 17.34%, respectively.
Ivy Asia Pacific Fund, Ivy European Opportunities Fund, Ivy Global Natural
Resources Fund, Ivy International Small Companies Fund and Ivy South America
Fund had no reportable performance inforamtion because the Advisor Class shares
of these Funds had been outstnding for less than a year as of December 31, 1999.
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 figures for Ivy China Region Fund's Advisor
Class shares for the period from inception through December 31, 1999 and the
one-year period ended December 31, 1999 were 17.68% and 46.29%, respectively.
The Cumulative Total Return figures for Ivy Developing Markets Fund's
Advisor Class shares for the period from inception through December 31, 1999 and
the one-year period ended December 31, 1999 were 19.28% and 47.38%,
respectively.
The Cumulative Total Return figures for Ivy Global Fund's Advisor Class
shares for the period from inception through December 31, 1999 and the one-year
period ended December 31, 1999 were 13.85% and 26.77%, respectively.
The Cumulative Total Return figures for Ivy Global Science & Technology
Fund's Advisor Class shares for the period from inception through December 31,
1999 and the one-year period ended December 31, 1999 were 160.37% and 122.56%,
respectively.
The Cumulative Total Return figures for Ivy International Fund II's
Advisor Class shares for the period from inception through December 31, 1999 and
the one-year period ended December 31, 1999 were 28.10% and 28.30%,
respectively.
The Cumulative Total Return figures for Ivy Pan-Europe Fund's Advisor
Class shares for the period from inception through December 31, 1999 and the
one-year period ended December 31, 1999 were 8.58% and 18.50%, respectively.
Ivy Asia Pacific Fund, Ivy European Opportunities Fund, Ivy Global Natural
Resources Fund, Ivy International Small Companies Fund and Ivy South America
Fund had no reportable performance information because the Advisor Class shares
of these Funds had been outstanding for less than a year as of December 31,
1999.
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 Portfolio of Investments as of December 31, 1999, Statement
of Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 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
May 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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 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 Funds dated May 1, 2000 (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.
Each Fund's Annual Report to shareholders dated December 31, 1999 (each
an "Annual Report") is incorporated by reference into this SAI. Each Fund's
Annual Report may 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
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TABLE OF CONTENTS
PAGES
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.....................8
IVY US EMERGING GROWTH FUND..........................................11
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND..............11
EQUITY SECURITIES....................................................14
CONVERTIBLE SECURITIES...............................................14
SMALL COMPANIES......................................................15
INITIAL PUBLIC OFFERINGS.............................................15
ADJUSTABLE RATE PREFERRED STOCKS.....................................15
DEBT SECURITIES......................................................16
IN GENERAL...........................................................16
INVESTMENT-GRADE DEBT SECURITIES.....................................16
LOW-RATED DEBT SECURITIES............................................16
U.S. GOVERNMENT SECURITIES...........................................18
ZERO COUPON BONDS....................................................18
ILLIQUID SECURITIES..................................................19
FOREIGN SECURITIES...................................................20
EMERGING MARKETS.....................................................21
FOREIGN CURRENCIES...................................................22
FOREIGN CURRENCY EXCHANGE TRANSACTIONS...............................23
REPURCHASE AGREEMENTS................................................24
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS....................24
COMMERCIAL PAPER.....................................................24
BORROWING............................................................25
WARRANTS 25
REAL ESTATE INVESTMENT TRUSTS (REITS)................................25
OPTIONS TRANSACTIONS.................................................25
IN GENERAL...........................................................25
WRITING OPTIONS ON INDIVIDUAL SECURITIES.............................27
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES..........................27
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES.................28
RISKS OF OPTIONS TRANSACTIONS........................................28
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...................29
IN GENERAL...........................................................29
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS....................31
SECURITIES INDEX FUTURES CONTRACTS...................................32
RISKS OF SECURITIES INDEX FUTURES....................................32
COMBINED TRANSACTIONS................................................34
PORTFOLIO TURNOVER............................................................34
TRUSTEES AND OFFICERS.........................................................34
CLASS A 39
CLASS B 41
CLASS C 43
CLASS I 45
ADVISOR CLASS........................................................46
INVESTMENT ADVISORY AND OTHER SERVICES........................................49
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.................49
DISTRIBUTION SERVICES................................................52
RULE 12B-1 DISTRIBUTION PLANS........................................53
CUSTODIAN............................................................58
FUND ACCOUNTING SERVICES.............................................59
TRANSFER AGENT AND DIVIDEND PAYING AGENT.............................59
ADMINISTRATOR........................................................60
AUDITORS 60
BROKERAGE ALLOCATION..........................................................60
CAPITALIZATION AND VOTING RIGHTS..............................................61
SPECIAL RIGHTS AND PRIVILEGES.................................................63
AUTOMATIC INVESTMENT METHOD..........................................63
EXCHANGE OF SHARES...................................................63
INITIAL SALES CHARGE SHARES..........................................64
CONTINGENT DEFERRED SALES CHARGE SHARES..............................64
LETTER OF INTENT.....................................................66
RETIREMENT PLANS.....................................................67
INDIVIDUAL RETIREMENT ACCOUNTS:......................................68
ROTH IRAS:...........................................................69
QUALIFIED PLANS:.....................................................69
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"):...............................................70
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS:............................71
SIMPLE PLANS:........................................................71
REINVESTMENT PRIVILEGE...............................................71
RIGHTS OF ACCUMULATION...............................................71
SYSTEMATIC WITHDRAWAL PLAN...........................................72
GROUP SYSTEMATIC INVESTMENT PROGRAM..................................72
REDEMPTIONS...................................................................73
CONVERSION OF CLASS B SHARES..................................................75
NET ASSET VALUE...............................................................75
TAXATION 77
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS..............77
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES...............79
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES...................79
DEBT SECURITIES ACQUIRED AT A DISCOUNT...............................80
DISTRIBUTIONS........................................................80
DISPOSITION OF SHARES................................................81
FOREIGN WITHHOLDING TAXES............................................81
BACKUP WITHHOLDING...................................................82
PERFORMANCE INFORMATION.......................................................82
AVERAGE ANNUAL TOTAL RETURN..........................................82
CUMULATIVE TOTAL RETURN..............................................91
IVY GROWTH WITH INCOME FUND...................................................92
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION................94
FINANCIAL STATEMENTS..........................................................94
APPENDIX A....................................................................96
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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 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 22, 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 22,
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 22,
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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, 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 a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
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 equity securities of domestic
corporations with low price-earnings ratios and rising earnings. Approximately
one half 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. The other half is invested in equity
securities of small and medium-sized U.S. companies that are in the early stages
of their life cycles and that are believed to have the potential to increase
their sales and earnings at above average rates.
Ivy Growth Fund may invest up to 5% 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 Investors Service, Inc.
("Moody's") or BBB by Standard & Poors Ratings Services ("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.
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 (as defined in the 1940 Act) of the outstanding voting
shares of the Fund. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by its Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 (including predecessors) less than three years
old;
(vi) invest more than 5% of the value of its total assets in the securities
of issuers which are not readily marketable;
(vii)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;
(viii) purchase securities on margin;
(ix) sell securities short;
(x) 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; or
(xi) 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 (v) 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.
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 equity securities 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.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(vi) invest more than 5% of the value of its total assets in the securities of
issuers which are not readily marketable;
(vii)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;
(viii) purchase securities on margin;
(ix) sell securities short;
(x) 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; or
(xi) purchase the securities of any other open-end investment company, except as
part of a plan of merger or consolidation.
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 (v) 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.
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 or BBB by S&P, or,
if unrated, are considered by IMI to be of comparable quality), preferred
stocks, or cash or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy 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. The Fund may purchase
interest rate and other financial futures contracts and related options. 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. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 of 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;
(viii) purchase securities of another investment company, except in connection
with a merger, consolidation, reorganization or acquisition or assets, and
except that the Fund may (i) invest in securities of other investment
companies subject to the restrictions set forth in Section 12(d)(1) of the
1940 Act and (ii) 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;
(ix) 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;
(x) sell securities short;
(xi) 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; or
(xii)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.
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 (v) 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. Despite fundamental investment restriction (vi) above, the Fund
may invest in interest rate and other financial futures contracts and related
options.
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 equity securities
of small- and medium-sized companies, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading.
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.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(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;
(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;
(ix) purchase securities on margin;
(x) sell securities short;
(xi) 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; or
(xii)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.
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 (v) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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.
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, if so, could 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. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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. Ivy U.S. Blue Chip Fund's
portfolio turnover rate was significantly higher in 1999 than it was in 1998
because of the late date of its inception in 1998.
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:
<TABLE>
<CAPTION>
- -------------------------------------- ----------------------------- -------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
- -------------------------------------- ----------------------------- -------------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested Investment Management Inc. (1995-present);
person" of the Trust, as defined Senior Vice President, Mackenzie Investment
under the 1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present); Chairman, Broyhill
800 Hickory Blvd. Family Foundation, Inc. (1983-present); Chairman, Broyhill
Golfview Park-Box 500 Investments, Inc. (1997-present); Chairman and President,
Lenoir, NC 28645 Broyhill Investments, Inc. (1983-1997); Chairman, Broyhill
Age: 76 Timber Resources (1983-present); Management of a personal
portfolio of fixed-income and equity instruments
(1983-present); Trustee of Mackenzie Series Trust
(1988-1998); Director of The Mackenzie Funds Inc.
(1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested President, Mackenzie Investment Management Inc.
person" of the Trust, as defined (1996-1997); Senior Vice President and
under the 1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998).
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
*The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel Jr.,
P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares (34.67%)
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville, FL 32246,
owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares (25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE FBO
Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC Private Bus
Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370, Cooper Station
New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith For
the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607 (21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target Benefit
Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890, owned of
record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn: Russ
Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box 173736,
Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
A. CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith Inc.
Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%) and
Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD 5/2/94 Martha K
Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record 10,022 shares
(6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and Prudential
Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy Shargorodsky
Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record 20,520.944 shares
(13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
B. CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert M.
Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%),
Salomon Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170th ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO Vytautas Sniekus, 1250 E 276th St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares (71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
C. CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison Engines,
200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record 327,350.589
shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box 83084,
Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%), Harleysville
Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438, owned of record
191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great Lakes Chemical
RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S, Chicago, IL
60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark Taper
Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049, owned of
record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company FBO
Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
D. ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST, International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 19,521.431 shares (73.06%), Brown Brothers Harriman & Co.
CUST International Solutions V- Aggressive Growth, Attn: Terron McGovern, 40
Water St. Boston, MA 02109, owned of record 5,387.835 shares (20.17%), Brown
Brothers Harriman & Co. CUST International Solutions II - Balanced Growth, Attn:
Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record 1,602.659
shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 32,622.646 shares (61.95%), Brown Brothers Harriman & Co.
CUST International Solutions III - Moderate Growth, Attn: Terron McGovern, 40
Water Street, Boston, MA 02109, owned of record 9,740.980 shares (18.49%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 5,243.316 shares (9.95%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 3,240.952 shares (6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot TTEE
Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton, FL
33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 35,889.863 shares (24.70%), Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 26,271.557 shares (18.08%) and Brown Brothers Harriman
& Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management Inc.
Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300,
Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as manager and investment adviser to the
other series of Ivy 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, 1997, 1998 and 1999, Ivy
Growth Fund paid IMI fees of $2,794,304, $2,722,314 and $2,731,358,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $0, $0 and $113,237, 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, 1997, 1998 and 1999, Ivy
Growth with Income Fund paid IMI fees of $624,013, $702,361 and $674,369,
respectively.
Ivy US Blue Chip 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, 1998 and 1999, Ivy US Blue
Chip Fund paid IMI fees of $1,687 and $78,946, respectively. During the fiscal
year ended December 31, 1998 and 1999, IMI reimbursed Fund expenses in the
amount of $11,052 and $213,586, respectively.
Ivy US Emerging Growth Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual rate of 0.85%
of the Fund's average net assets.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid IMI fees of $973,756, $985,816 and $1,070,591,
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 the total operating expenses (excluding Rule 12b-1
fees, interest, taxes, brokerage commissions, litigation, class-specific
expenses, indemnification expenses, and extraordinary expenses) of Ivy US Blue
Chip Fund to an annual rate of 1.34% 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 years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Growth Fund $105,281, $71,547, and
$67,547, respectively, in sales commissions, of which $16,522, $10,859, and
$10,389 was retained after dealer allowance. During the fiscal year ended
December 31, 1999, IMDI received $7,985 in CDSCs on redemptions of Class B
shares of Ivy Growth Fund. During the fiscal year ended December 31, 1999, IMDI
received $1,004 in CDSCs on redemptions of Class C shares of Ivy Growth Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Growth with Income Fund $71,705,
$46,641, and $40,494, respectively, in sales commissions, of which $11,042,
$7,545, and $6,459, respectively, was retained after dealer allowance. During
the fiscal year ended December 31, 1999, IMDI received $21,577 in CDSCs on
redemptions of Class B shares of Ivy Growth with Income Fund. During the fiscal
year ended December 31, 1999, IMDI received $1,975 in CDSCs on redemptions of
Class C shares of Ivy Growth with Income Fund.
During the fiscal years ended December 31, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy US Blue Chip Fund $12,738 and
$69,514, respectively, in sales commissions, of which $1,940 and $8,790,
respectively, was retained after dealer allowance. During the fiscal year ended
December 31, 1999, IMDI received $26 in CDSCs on redemptions of Class B shares
of Ivy US Blue Chip Fund. During the fiscal year ended December 31, 1999, IMDI
received $2,004 in CDSCs on redemptions of Class C shares of Ivy US Blue Chip
Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy US Emerging Growth Fund $350,718,
$102,664, and $167,177, respectively, in sales commissions, of which $46,744,
$14,318, and $23,611, respectively, was retained after dealer allowance. During
the fiscal year ended December 31, 1999, IMDI received $36,337 in CDSCs on
redemptions of Class B shares of Ivy US Emerging Growth Fund. During the fiscal
year ended December 31, 1999, IMDI received $9,258 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, banks,
investment advisers, financial institutions and other entities 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 or other party 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, 1999, Ivy Growth Fund paid
IMDI $170,946 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy Growth Fund paid IMDI $61,058 pursuant to its Class B
plan. During the fiscal year ended December 31, 1999, Ivy Growth Fund paid IMDI
$2,812 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Growth Fund: advertising
$0; printing and mailing of prospectuses to persons other than current
shareholders, $55,887; compensation to underwriters $0; compensation to dealers,
$145,049; compensation to sales personnel $1,157,581; interest, carrying or
other financing charges $0; seminars and meetings, $36,262; travel and
entertainment, $115,690; general and administrative, $699,514; telephone,
$35,680; and occupancy and equipment rental, $91,829.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Growth Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $1,070; compensation to underwriters $0; compensation to dealers,
$11,550; compensation to sales personnel, $22,979; interest, carrying or other
financing charges $0; seminars and meetings, $2,887; travel and entertainment,
$2,305; general and administrative, $13,741; telephone, $707; and occupancy and
equipment rental $1,801.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Growth Fund: advertising,
$1; printing and mailing of prospectuses to persons other than current
shareholders, $50; compensation to underwriters $0; compensation to dealers,
$851; compensation to sales personnel, $1,102; interest, carrying or other
financing charges $0; seminars and meetings, $212; travel and entertainment,
$109; general administrative, $658; telephone, $33; and occupancy and equipment
rental, $86.
During the fiscal year ended December 31, 1999, Ivy Growth with Income
Fund paid IMDI $132,149 pursuant to its Class A plan. During the fiscal year
ended December 31, 1999, Ivy Growth with Income Fund paid IMDI $229,676 pursuant
to its Class B plan. During the fiscal year ended December 31, 1999, Ivy Growth
with Income Fund paid IMDI $5,811 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Growth with Income Fund:
advertising $0; printing and mailing of prospectuses to persons other than
current shareholders, $12,511; compensation to underwriters $0;compensation to
dealers, $28,408; compensation to sales personnel $239,882; interest, carrying
or other financing charges $0; seminars and meetings, $7,102; travel and
entertainment, $23,920; general and administrative, $145,339; telephone, $7,396;
and occupancy and equipment rental, $19,096.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Growth with Income Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $4,337; compensation to underwriters $0; compensation to
dealers, $27,468; compensation to sales personnel, $83,698; interest, carrying
or other financing charges $0; seminars and meetings, $6,867; travel and
entertainment, $8,356; general and administrative, $50,604; telephone, $2,580;
and occupancy and equipment rental $6,645.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Growth with Income Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $133; compensation to underwriters $0; compensation to
dealers, $460; compensation to sales personnel, $2,159; interest, carrying or
other financing charges $0; seminars and meetings, $115; travel and
entertainment, $222; general administrative, $1,442; telephone, $69; and
occupancy and equipment rental, $186.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid IMDI $5,576 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy US Blue Chip Fund paid IMDI $57,173 pursuant to its Class
B plan. During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid IMDI $18,084 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, 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, $0; compensation to underwriters $0; compensation to
dealers, $1,299; compensation to sales personnel $8,206; interest, carrying or
other financing charges $0; seminars and meetings, $325; travel and
entertainment, $842; general and administrative, $4,766; telephone, $251; and
occupancy and equipment rental, $619.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy US Blue Chip Fund:
advertising, $205; printing and mailing of prospectuses to persons other than
current shareholders, $17,338; compensation of underwriters $0; compensation to
dealers, $22,670; compensation to sales personnel, $26,795; interest, carrying
or other financing charges $0; seminars and meetings, $5,668; travel and
entertainment, $2,649; general and administrative, $15,676; telephone, $814; and
occupancy and equipment rental $2,069.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy US Blue Chip Fund:
advertising, $73; printing and mailing of prospectuses to persons other than
current shareholders, $4,987; compensation to underwriters $0; compensation to
dealers, $5,188; compensation to sales personnel, $8,328; interest, carrying or
other financing charges $0; seminars and meetings, $1,298; travel and
entertainment, $832; general administrative, $4,840; telephone, $253; and
occupancy and equipment rental, $636.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid IMDI $154,097 pursuant to its Class A plan. During the fiscal year
ended December 31, 1999, Ivy US Emerging Growth Fund paid IMDI $530,238 pursuant
to its Class B plan. During the fiscal year ended December 31, 1999, Ivy US
Emerging Growth Fund paid IMDI $104,332 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy US Emerging Growth Fund:
advertising $0; printing and mailing of prospectuses to persons other than
current shareholders, $22,608; compensation to underwriters $0; compensation to
dealers, $32,323; compensation to sales personnel $237,055; interest, carrying
or other financing charges $0; seminars and meetings, $8,081; travel and
entertainment, $23,752; general and administrative, $142,608; telephone, $7,300;
and occupancy and equipment rental, $18,703.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy US Emerging Growth Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $19,310; compensation to underwriters $0; compensation to
dealers, $58,429; compensation to sales personnel, $200,870; interest, carrying
or other financing charges $0; seminars and meetings, $14,607; travel and
entertainment, $20,086; general and administrative, $120,713; telephone, $6,182;
and occupancy and equipment rental $15,846.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy US Emerging Growth Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $3,780; compensation to underwriters $0; compensation to
dealers, $21,447; compensation to sales personnel, $39,452; interest, carrying
or other financing charges $0; seminars and meetings, $5,362; travel and
entertainment, $3,947; general administrative, $23,696; telephone, $1,214; and
occupancy and equipment rental, $3,110.
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, 1999, Ivy Growth Fund paid MIMI
$113,237 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Growth with Income
Fund paid MIMI $98,036 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid MIMI $29,915 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid MIMI $100,632 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, located at
Via Mizner Financial Plaza, Ste. 300, 700 S. Federal Hwy., Boca Raton, Florida,
33432, 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, 1999 for Ivy Growth Fund totaled $778,713. Such fees and expenses
for the fiscal year ended December 31, 1999 for Ivy Growth with Income Fund
totaled $250,101. Such fees and expenses for the fiscal year ended December 31,
1999 for Ivy US Blue Chip Fund totaled $17,901. Such fees and expenses for the
fiscal year ended December 31, 1999 for Ivy US Emerging Growth Fund totaled
$333,603. 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, 1999 for Ivy Growth Fund totaled $321,469. Such fees for the
fiscal year ended December 31, 1999 for Ivy Growth with Income Fund totaled
$89,916. Such fees for the fiscal year ended December 31, 1999 for Ivy US Blue
Chip Fund totaled $10,526. Such fees for the fiscal year ended December 31, 1999
for Ivy US Emerging Growth Fund totaled $100,632.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, located at 200
E. Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida, 33301, 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, 1997, 1998 and 1999, Ivy
Growth Fund paid brokerage commissions of $683,881, $907,345 and $739,391,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Growth with Income Fund paid brokerage commissions of $155,283, $378,887 and
$246,111, respectively.
During the fiscal year ended December 31, 1998 and 1999, Ivy US Blue
Chip Fund paid brokerage commissions of $1,806 and $19,700, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid brokerage commissions of $583,738, $658,613 and
$588,118, 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 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. Pursuant to the Declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. The
Trustees have authorized twenty-one 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 Cundill Value Fund, Ivy Developing Markets
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, Ivy South America Fund and Ivy Next Wave Internet Fund, as
well as Class I shares for Ivy Bond Fund, Ivy Cundill Value 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, Ivy US Blue Chip Fund and Ivy Next Wave
Internet 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 Cundill
Value Fund, Ivy Developing Markets 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, Ivy South America Fund, and Ivy Next Wave Internet Fund
(the other seventeen 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 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.
On August 19, 1999, Ivy US Emerging Growth Fund and Hudson Capital
Appreciation Fund ("Hudson Capital") entered into an Agreement and Plan of
Reorganization (the "Plan") pursuant to which all or substantially all of the
assets of Hudson Capital would be acquired by Ivy US Emerging Growth Fund in
exchange solely for Class A and Class B voting shares of beneficial interest of
Ivy US Emerging Growth Fund (the "Reorganization"). In connection with the
Reorganization, the parties agreed that no sales charge would be imposed in
connection with the issuance of Ivy US Emerging Growth Fund shares to
shareholders of Hudson Capital pursuant to the Plan. In addition, the parties
agreed that former Class N shareholders of Hudson Capital would be exempt from
the initial sales charge on additional purchases of Class A shares of Ivy US
Emerging Growth Fund.
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 Cundill Value Fund, Ivy
Developing Markets 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,
Ivy US Emerging Growth Fund and Ivy Next Wave Internet Fund.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C shares
("outstanding Class C shares") for Class C shares of another Ivy fund ("new
Class C shares") on the basis of the relative net asset value per Class C share,
without the payment of any CDSC that would otherwise be due upon redemption.
(Class C shares are subject to a CDSC of 1.00% 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). 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).
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 Cundill Value Fund, Ivy
Developing Markets 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,
Ivy US Emerging Growth Fund and Ivy Next Wave Internet 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.
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, an 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 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 are 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 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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in 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 quoted
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 in accordance with procedures 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. The Funds are not managed for tax-efficiency.
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.
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
Year ended December 31, 1999 24.28% 25.63% 29.43%
Five Years ended December 31, 18.77% 18.85% N/A
1999
Ten Years ended December 31, 13.05% N/A N/A
1999
Inception [#] to year ended 11.37% 14.80% 15.74%
December 31, 1999 [5]:
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4] CLASS C
Year ended December 31, 1999 31.87% 30.63% 30.43%
Five Years ended December 31, 20.18% 19.05% N/A
1999
Ten Years ended December 31, 13.72% N/A N/A
1999
Inception [#] to year ended 11.54% 14.80% 15.74%
December 31, 1999 [5]:
[*] 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 22, 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, 1999 and the one,
five and ten year periods ended December 31, 1999 would have been 11.37%,
24.28%, 18,.77%, and 13.02%, 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, 1999 and the one and
five year periods ended December 31, 1999 would have been 14.77%, 25.63%, and
18.85%, respectively. (Since the inception date for Class B shares was October
22, 1993, there were no Class B shares outstanding for the duration of the
ten-year period ended December 31, 1999.)
[3] 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, 1999 and the
one, five and ten year periods ended December 31, 1999 would have been 11.54%,
31.87%, 20.18%, and 13.69%, respectively.
[4] 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, 1999 and the
one and five year periods ended December 31, 1999 would have been 14.77%,
30.63%, and 19.05%, respectively. (Since the inception date for Class B shares
was October 22, 1993, there were no Class B shares outstanding for the duration
of the ten-year period ended December 31, 1999.)
[5] 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 CLASS C
Year ended December 31, 1999 4.60% 5.14% 8.91%
Five years ended December 16.02% 16.31% N/A
31, 1999
Ten years ended December 12.71% N/A N/A
31, 1999:
Inception [#] to year ended 14.80% 12.72% 14.18%
December 31, 1999 [3]:
NON-STANDARDIZED RETURN[**]
CLASS A[2] CLASS B CLASS C
Year ended December 31, 10.98% 10.14% 9.91%
1999:
Five years ended December 17.40% 16.53% N/A
31, 1999
Ten years ended December 13.38% N/A N/A
31, 1999:
Inception [#] to year ended 15.23% 12.72% 14.18%
December 31, 1999 [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
22, 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, 1999 and the one,
five and ten year periods ended December 31, 1999 would have been 14.80%, 4.60%,
16.02%, and 12.70%, respectively.
[2] 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, 1999 and the
one, five and ten year periods ended December 31, 1999 would have been 15.23%,
10.98%, 17.40%, and 13.37%, respectively.
[3] The total return for a period less than a full year is calculated on an
aggregate basis and is not annualized.
IVY US BLUE CHIP FUND
STANDARD RETURN[*]
<TABLE>
<CAPTION>
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
<S> <C> <C> <C> <C>
Year ended December 31, 8.71% 9.74% 13.84% N/A
1999
Inception [#] to year 14.29% 13.28% 16.76% N/A
ended December 31, 1999
[8]
NON-STANDARD RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended 15.35% 14.74% 14.84% N/A
December 31, 1999
Inception [#] to year 20.25% 16.68% 16.76% N/A
ended December 31, 1999
[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 one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 7.11% and
12.00%, 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 one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 8.05% and
10.99%, 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 one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 12.05% and
14.37%, respectively.
[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 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 one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.66% and
17.89%, respectively.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.05% and
14.33%, 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 one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.05% and
14.37%, respectively.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY US EMERGING GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C
Year ended December 31, 53.13% 56.27% 60.32%
1999
Five years ended 25.97% 26.39% N/A
December 31, 1999
Inception [#] to year 26.36% 21.40% 18.60%
ended December 31, 1999
[7]:
NON-STANDARDIZED RETURN[**]
CLASS A CLASS B[3] CLASS C
Year ended December 31, 62.47% 61.27% 61.32%
1999
Five years ended 27.47% 26.54% N/A
December 31, 1999
Inception [#] to year 27.47% 21.40% 18.60%
ended December 31, 1999
[4]:
- ---------------------------- -------------------- ------------------- ----------
[*] 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 22, 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, 1999 and the one and
five year periods ended December 31, 1999 would have been 26.34%, 53.13%, and
25.97%, 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, 1999 and the one and
five year periods ended December 31, 1999 would have been 21.39%, 56.27%, and
26.39%, respectively.
[3] 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, 1999 and the
one and five year periods ended December 31, 1999 would have been 21.39%,
61.27%, and 26.54%, respectively.
[4] 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, 1999,
assuming the maximum 5.75% sales charge has been assessed.
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
<S> <C> <C> <C> <C>
Class A 24.28% 136.31% 240.91% 6,066.80%
Class B 25.63% 137.09% N/A 135.16%
Class C 29.43% N/A N/A 71.02%
</TABLE>
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth Fund for the periods indicated through December 31, 1999,
assuming the maximum 5.75% sales charge has not been assessed.
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
<S> <C> <C> <C> <C>
Class A 31.87% 150.73% 261.71% 6,443.02%
Class B 30.63% 139.09% N/A 135.16%
Class C 30.43% N/A N/A 71.02%
</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
22, 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, 1999, assuming the maximum 5.75% sales charge has been assessed.
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
<S> <C> <C> <C> <C>
Class A 4.60% 110.21% 230.97% 770.73%
Class B 5.14% 112.86% N/A 109.95%
Class C 8.91% N/A N/A 62.72%
</TABLE>
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth with Income Fund for the periods indicated through
December 31, 1999, assuming the maximum 5.75% sales charge has not been
assessed.
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
<S> <C> <C> <C> <C>
Class A 10.98% 123.03% 251.16% 823.85%
Class B 10.14% 114.86% N/A 109.95%
Class C 9.91% N/A N/A 62.72%
</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 22, 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,
1999, assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 8.71% 16.76%
Class B 9.74% 15.42%
Class C 13.84% 19.52%
Class I N/A 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,
1999, assuming the maximum 5.75% sales charge has not been assessed.
ONE YEAR SINCE INCEPTION[*]
Class A 15.35% 23.88%
Class B 14.74% 19.42%
Class C 14.84% 19.52%
Class I N/A 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, 1999, assuming the maximum 5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 53.13% 217.21% 376.18%
Class B 56.27% 222.49% 232.48%
Class C 60.32% N/A 87.04%
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Emerging Growth Fund for the periods indicated through
December 31, 1999, assuming the maximum 5.75% sales charge has not been
assessed.
ONE YEAR FIVE YEARS SINCE INCEPTION[*]
Class A 62.47% 236.56% 405.23%
Class B 61.27% 224.49% 232.48%
Class C 61.32% N/A 87.04%
- ---------------------------
[*] 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 22, 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, 1999, Statement
of Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in the Fund's December 31, 1999 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 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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
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 Funds' Advisor Class shares dated May 1, 2000 (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.
Each Fund's annual Report to shareholders, dated December 31, 1999
(each an "Annual Report") is incorporated by reference into this SAI. Each
Fund's Annual Report may 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
pages
GENERAL INFORMATION............................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS....................................1
IVY GROWTH FUND.......................................................1
IVY GROWTH WITH INCOME FUND...........................................4
IVY US BLUE CHIP FUND.................................................7
IVY US EMERGING GROWTH FUND..........................................10
EQUITY SECURITIES....................................................13
CONVERTIBLE SECURITIES...............................................14
SMALL COMPANIES......................................................14
INITIAL PUBLIC OFFERINGS.............................................15
ADJUSTABLE RATE PREFERRED STOCKS.....................................15
DEBT SECURITIES......................................................15
ILLIQUID SECURITIES..................................................18
FOREIGN SECURITIES...................................................19
EMERGING MARKETS.....................................................20
FOREIGN CURRENCIES...................................................21
FOREIGN CURRENCY EXCHANGE TRANSACTIONS...............................22
REPURCHASE AGREEMENTS................................................23
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS....................23
COMMERCIAL PAPER.....................................................24
BORROWING............................................................24
WARRANTS 24
REAL ESTATE INVESTMENT TRUSTS (REITS)................................24
OPTIONS TRANSACTIONS.................................................25
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...................29
SECURITIES INDEX FUTURES CONTRACTS...................................31
PORTFOLIO TURNOVER............................................................33
TRUSTEES AND OFFICERS.........................................................33
CLASS A 39
CLASS B 41
CLASS C 42
ADVISOR CLASS........................................................46
INVESTMENT ADVISORY AND OTHER SERVICES........................................49
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.................49
DISTRIBUTION SERVICES................................................51
CUSTODIAN............................................................53
FUND ACCOUNTING SERVICES.............................................53
TRANSFER AGENT AND DIVIDEND PAYING AGENT.............................53
ADMINISTRATOR........................................................54
AUDITORS 54
BROKERAGE ALLOCATION..........................................................54
CAPITALIZATION AND VOTING RIGHTS..............................................55
SPECIAL RIGHTS AND PRIVILEGES.................................................57
AUTOMATIC INVESTMENT METHOD..........................................57
EXCHANGE OF SHARES...................................................58
RETIREMENT PLANS.....................................................58
SYSTEMATIC WITHDRAWAL PLAN...........................................62
GROUP SYSTEMATIC INVESTMENT PROGRAM..................................63
REDEMPTIONS...................................................................63
NET ASSET VALUE...............................................................64
TAXATION 66
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS..............67
DEBT SECURITIES ACQUIRED AT A DISCOUNT...............................69
DISTRIBUTIONS........................................................70
DISPOSITION OF SHARES................................................70
FOREIGN WITHHOLDING TAXES............................................71
BACKUP WITHHOLDING...................................................71
PERFORMANCE INFORMATION.......................................................71
FINANCIAL STATEMENTS..........................................................74
APPENDIX A....................................................................75
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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 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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in the Fund's overall investment strategy, 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 a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
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 equity securities of domestic
corporations with low price-earnings ratios and rising earnings. Approximately
one half 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. The other half is invested in equity
securities of small and medium-sized U.S. companies that are in the early stages
of their life cycles and that are believed to have the potential to increase
their sales and earnings at above average rates.
Ivy Growth Fund may invest up to 5% 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 Investors Service, Inc.
("Moody's") or BBB by Standard & Poors Ratings Services ("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.
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 (as defined in the 1940 Act) of the outstanding voting
shares of the Fund. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by its Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 (including predecessors) less than three years old;
(vi) invest more than 5% of the value of its total assets in the securities of
issuers which are not readily marketable;
(vii)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;
(viii) purchase securities on margin;
(ix) sell securities short;
(x) 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; or
(xi) 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 (v) 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.
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 equity securities 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.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(vi) invest more than 5% of the value of its total assets in the securities of
issuers which are not readily marketable;
(viii) 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;
(ix) purchase securities on margin;
(x) sell securities short;
(xi) 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; or
(xii)purchase the securities of any other open-end investment company, except
as part of a plan of merger or consolidation.
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 (v) 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.
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 or BBB by S&P, or,
if unrated, are considered by IMI to be of comparable quality), preferred
stocks, or cash or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy 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. The Fund may purchase
interest rate and other financial futures contracts and related options. 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. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 of 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;
(viii) purchase securities of another investment company, except in connection
with a merger, consolidation, reorganization or acquisition or assets, and
except that the Fund may (i) invest in securities of other investment
companies subject to the restrictions set forth in Section 12(d)(1) of the
1940 Act and (ii) 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;
(ix) 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;
(x) sell securities short;
(xi) 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; or
(xii)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.
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 (v) 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. Despite fundamental investment restriction (vi) above, the Fund
may invest in interest rate and other financial futures contracts and related
options.
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 equity securities
of small- and medium-sized companies, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading.
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.
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.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(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;
(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;
(ix) purchase securities on margin;
(x) sell securities short;
(xi) 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; or
(xii)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.
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 (v) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities shares represent a proportionate ownership interest in a company. As
a result, the value of equity securities rises and falls with a company's
success or failure. The market value of equity securities 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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
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.
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, if so, could 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. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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. Ivy U.S. Blue Chip Fund's
portfolio turnover rate was significantly higher in 1999 than it was in 1998
because of the late date of its inception in 1998.
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:
<TABLE>
<CAPTION>
- ---------------------------------------- ----------------------------- -----------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL
OCCUPATIONS
- ---------------------------------------- ----------------------------- -----------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp.
60 Concord Street (instruments and controls); Director,
Wilmington, MA 01887 Burr-Brown Corp. (operational amplifiers);
Age: 76 Director, Mass. High Tech. Council; Trustee
of Mackenzie Series Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested person" Investment Management Inc. (1995-present);
of the Trust, as defined under the Senior Vice President, Mackenzie Investment
1940 Act.] Management Inc. (1990-1995); President and Trustee,
Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present); Chairman, Broyhill
800 Hickory Blvd. Family Foundation, Inc. (1983-present); Chairman, Broyhill
Golfview Park-Box 500 Investments, Inc. (1997-present); Chairman and President,
Lenoir, NC 28645 Broyhill Investments, Inc. (1983-1997); Chairman, Broyhill
Age: 76 Timber Resources (1983-present); Management of a personal
portfolio of fixed-income and equity instruments
(1983-present); Trustee of Mackenzie Series Trust
(1988-1998); Director of The Mackenzie Funds Inc.
(1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management
Suite 300 Inc. (1999-present); Executive Vice President
Boca Raton, FL 33432 and Chief Operating Officer, Mackenzie
Age: 43 Investment Management Inc. (1997-1999);
[*Deemed to be an "interested person" Senior Vice President, Mackenzie Investment
of the Trust, as defined under the Management Inc. (1996-1997); Senior Vice
1940 Act.] President and Director, Mackenzie Investment
Management Inc. (1994-1996); Chairman, Senior
Vice President and Director, Ivy Management,
Inc. (1994-present); Vice President, The
Mackenzie Funds Inc. (1987-1995); Director,
Ivy Mackenzie Services Corp. (1993-present);
Senior Vice President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
President and Director, Ivy Mackenzie
Services Corp. (1993-1996); Trustee and
President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee,
Waban, MA 02168 Boston Ballet; Overseer, Boston Children's
Age: 76 Museum; Trustee, Ralph Lowell Society WGBH;
Trustee, Newton Wellesley Charitable
Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer,
4701 North Federal Hwy. Airspray International, Inc.; Joint Managing
Suite 465 Director, Airspray N.V (an environmentally
Pompano Beach, FL 33064 sensitive packaging company); Director,
Age: 70 Polyglass LTD.; Director, Park Towers
International; Director, The Mackenzie Funds
Inc. (1992-1995); Trustee, Mackenzie Series
Trust (1992-1998).
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services
firm); President, Director and Chief
Executive Officer, Global Mutual Fund
Services, Inc. (1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer
700 South Federal Hwy. and Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer
and Director, Ivy Mackenzie Distributors,
Inc. (1994-present); Director, President and
Chief Executive Officer, Ivy Mackenzie
Services Corp. (1997-present); President and
Director, Ivy Mackenzie Services Corp.
(1996-1997); Secretary/Treasurer and
Director, Ivy Mackenzie Services Corp.
(1993-1996); Secretary/Treasurer, The
Mackenzie Funds Inc. (1993-1995);
Secretary/Treasurer, Mackenzie Series Trust
(1994-1998); Secretary/Treasurer, Mackenzie
Solutions (1999-2000).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
*The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel Jr.,
P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares (34.67%)
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville, FL 32246,
owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares (25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE FBO
Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC Private Bus
Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370, Cooper Station
New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith For
the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607 (21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target Benefit
Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890, owned of
record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn: Russ
Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box 173736,
Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith Inc.
Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%) and
Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD 5/2/94 Martha K
Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record 10,022 shares
(6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and Prudential
Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy Shargorodsky
Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record 20,520.944 shares
(13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert M.
Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%),
Salomon Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170th ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO Vytautas Sniekus, 1250 E 276th St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares (71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison Engines,
200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record 327,350.589
shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box 83084,
Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%), Harleysville
Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438, owned of record
191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great Lakes Chemical
RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S, Chicago, IL
60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark Taper
Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049, owned of
record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company FBO
Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST, International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 19,521.431 shares (73.06%), Brown Brothers Harriman & Co.
CUST International Solutions V- Aggressive Growth, Attn: Terron McGovern, 40
Water St. Boston, MA 02109, owned of record 5,387.835 shares (20.17%), Brown
Brothers Harriman & Co. CUST International Solutions II - Balanced Growth, Attn:
Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record 1,602.659
shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 32,622.646 shares (61.95%), Brown Brothers Harriman & Co.
CUST International Solutions III - Moderate Growth, Attn: Terron McGovern, 40
Water Street, Boston, MA 02109, owned of record 9,740.980 shares (18.49%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 5,243.316 shares (9.95%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 3,240.952 shares (6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot TTEE
Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton, FL
33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 35,889.863 shares (24.70%), Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 26,271.557 shares (18.08%) and Brown Brothers Harriman
& Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management Inc.
Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300,
Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as manager and investment adviser to the
other series of Ivy 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, 1997, 1998 and 1999, Ivy
Growth Fund paid IMI fees of $2,794,304, $2,722,314 and $2,731,358,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $0, $0 and $113,237, 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, 1997, 1998 and 1999, Ivy
Growth with Income Fund paid IMI fees of $624,013, $702,361 and $674,369,
respectively.
Ivy US Blue Chip 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, 1998 and 1999, Ivy US Blue
Chip Fund paid IMI fees of $1,687 and $78,946, respectively. During the fiscal
year ended December 31, 1998 and 1999, IMI reimbursed Fund expenses in the
amount of $11,052 and $213,586, respectively.
Ivy US Emerging Growth Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual rate of 0.85%
of the Fund's average net assets.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid IMI fees of $973,756, $985,816 and $1,070,591,
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 the total operating expenses (excluding Rule 12b-1
fees, interest, taxes, brokerage commissions, litigation, class-specific
expenses, indemnification expenses, and extraordinary expenses) of Ivy US Blue
Chip Fund to an annual rate of 1.34% 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, 1999, Ivy Growth Fund paid
MIMI $113,237 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Growth with Income
Fund paid MIMI $98,036 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid MIMI $29,915 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid MIMI $100,632 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 located at
Via Mizner Financial Plaza, Ste. 300, 700 S. Federal Hwy., Boca Raton, Florida,
33432, 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, 1999 for Ivy Growth Fund totaled $778,713. Such fees and expenses
for the fiscal year ended December 31, 1999 for Ivy Growth with Income Fund
totaled $250,101. Such fees and expenses for the fiscal year ended December 31,
1999 for Ivy US Blue Chip Fund totaled $17,901. Such fees and expenses for the
fiscal year ended December 31, 1999 for Ivy US Emerging Growth Fund totaled
$333,603. 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, 1999 for Ivy Growth Fund totaled $321,469. Such fees for the
fiscal year ended December 31, 1999 for Ivy Growth with Income Fund totaled
$89,916. Such fees for the fiscal year ended December 31, 1999 for Ivy US Blue
Chip Fund totaled $10,526. Such fees for the fiscal year ended December 31, 1999
for Ivy US Emerging Growth Fund totaled $100,632.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants, located at 200
E. Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida, 33301, 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, 1997, 1998 and 1999, Ivy
Growth Fund paid brokerage commissions of $683,881, $907,345 and $739,391,
respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Growth with Income Fund paid brokerage commissions of $155,283, $378,887 and
$246,111, respectively.
During the fiscal year ended December 31, 1998 and 1999, Ivy US Blue
Chip Fund paid brokerage commissions of $1,806 and $19,700, respectively.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid brokerage commissions of $583,738, $658,613 and
$588,118, 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 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. Pursuant to the declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. 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 Cundill Value Fund, Ivy Developing Markets
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 Cundill Value 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 and Ivy Next Wave Internet 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 Cundill Value Fund,
Ivy Developing Markets 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, and Ivy Next Wave Internet Fund
(the other seventeen 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 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.
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, an
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 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 - $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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in 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 quoted
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 in accordance with procedures 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. The Funds are not managed for tax-efficiency.
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.
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, and the one-year period ended, December 31, 1999 was 17.86% and
31.87%, respectively.
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, and the one-year period ended, December 31, 1999 was
2.83% and 11.18%, respectively.
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 and the one-year period ended December 31, 1999 was
20.95% and 15.89% . These figures reflect expense reimbursement. Without
expense reimbursement, the Standardized Return would have been 18.20% and
13.80%.
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, and the one-year period ended, December 31, 1999 was
39.17% and 62.85%, respectively.
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 and the one-year period ended December 31, 1999 was
31.60% and 31.78%, respectively.
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 and the one-year period ended December 31,
1999 was 10.78% and 11.18%, respectively.
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, 1999 was 24.47% and 15.89%,
respectively.
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 and the one-year period ended December
31, 1999 was 85.28% and 62.85%, respectively.
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, 1999, Statement
of Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 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 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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 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 Funds dated May 1, 2000 (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.
Each Fund's Annual Report to shareholders, dated December 31, 1999
(each an "annual Report") is incorporated by reference into this SAI. Each
Fund's Annual Report may 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
PAGE
GENERAL INFORMATION.........................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.................................1
IVY BOND FUND......................................................1
INVESTMENT RESTRICTIONS FOR IVY BOND FUND..........................2
INVESTMENT RESTRICTIONS FOR IVY
INTERNATIONAL STRATEGIC BOND FUND...............................7
IVY MONEY MARKET FUND..............................................9
INVESTMENT RESTRICTIONS FOR IVY MONEY MARKET FUND.................11
EQUITY SECURITIES.................................................13
CONVERTIBLE SECURITIES............................................13
DEBT SECURITIES...................................................14
IN GENERAL...............................................14
INVESTMENT-GRADE DEBT SECURITIES.........................14
LOW-RATED DEBT SECURITIES................................14
U.S. GOVERNMENT SECURITIES...........................16
MUNICIPAL SECURITIES.....................................17
ZERO COUPON BONDS........................................17
FIRM COMMITMENT AGREEMENTS AND
"WHEN-ISSUED" SECURITIES..............................17
ILLIQUID SECURITIES...............................................18
FOREIGN SECURITIES................................................18
DEPOSITORY RECEIPTS...............................................19
EMERGING MARKETS..................................................20
FOREIGN SOVEREIGN DEBT OBLIGATIONS................................21
BRADY BONDS.......................................................22
LOAN PARTICIPATIONS AND ASSIGNMENTS...............................22
FOREIGN CURRENCIES................................................23
FOREIGN CURRENCY EXCHANGE TRANSACTIONS............................24
REPURCHASE AGREEMENTS.............................................25
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS.................25
COMMERCIAL PAPER..................................................25
BORROWING.........................................................26
SHORT SALES.......................................................26
OPTIONS TRANSACTIONS..............................................26
IN GENERAL...............................................26
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
INTEREST RATE FUTURES CONTRACTS..........................32
OPTIONS ON INTEREST RATE FUTURES CONTRACTS...............32
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................................35
RISKS OF SECURITIES INDEX FUTURES........................36
COMBINED TRANSACTIONS....................................37
PORTFOLIO TURNOVER.........................................................38
TRUSTEES AND OFFICERS......................................................38
PERSONAL INVESTMENTS BY EMPLOYEES OF
IMI, IMDI AND THE TRUST........................................53
INVESTMENT ADVISORY AND OTHER SERVICES.....................................53
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES..............53
DISTRIBUTION SERVICES.............................................55
RULE 18F-3 PLAN..........................................56
RULE 12B-1 DISTRIBUTION PLANS............................57
CUSTODIAN.........................................................61
FUND ACCOUNTING SERVICES..........................................61
TRANSFER AGENT AND DIVIDEND PAYING AGENT..........................61
ADMINISTRATOR.....................................................62
AUDITORS 62
BROKERAGE ALLOCATION.......................................................62
CAPITALIZATION AND VOTING RIGHTS...........................................63
SPECIAL RIGHTS AND PRIVILEGES..............................................65
AUTOMATIC INVESTMENT METHOD.......................................65
EXCHANGE OF SHARES................................................66
INITIAL SALES CHARGE SHARES..............................66
CONTINGENT DEFERRED SALES CHARGE SHARES...........................66
CLASS A 66
CLASS B 67
CLASS C 67
CLASS I 68
ALL CLASSES..............................................68
LETTER OF INTENT..................................................68
RETIREMENT PLANS..................................................69
INDIVIDUAL RETIREMENT ACCOUNTS...........................69
ROTH IRAS................................................70
QUALIFIED PLANS..........................................71
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")......................72
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS.................72
SIMPLE PLANS.............................................73
REINVESTMENT PRIVILEGE............................................73
RIGHTS OF ACCUMULATION............................................73
SYSTEMATIC WITHDRAWAL PLAN........................................74
GROUP SYSTEMATIC INVESTMENT PROGRAM...............................74
REDEMPTIONS................................................................75
CONVERSION OF CLASS B SHARES...............................................77
NET ASSET VALUE............................................................77
TAXATION 79
OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS..............................................80
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES............81
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES................81
DEBT SECURITIES ACQUIRED AT A DISCOUNT............................82
DISTRIBUTIONS.....................................................82
DISPOSITION OF SHARES.............................................83
FOREIGN WITHHOLDING TAXES.........................................84
BACKUP WITHHOLDING................................................85
PERFORMANCE INFORMATION....................................................85
YIELD .........................................................85
STANDARDIZED YIELD QUOTATIONS............................85
AVERAGE ANNUAL TOTAL RETURN..............................87
CUMULATIVE TOTAL RETURN..................................91
OTHER QUOTATIONS, COMPARISONS
AND GENERAL INFORMATION...............................93
FINANCIAL STATEMENTS.......................................................93
APPENDIX A.................................................................94
<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 commenced operations
on May 3, 1999. 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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in the Fund's overall investment strategy, 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.
Whenever an investment objective, policy or restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall, unless otherwise
indicated, apply to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
Fund's control, will not be considered a violation.
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
Ratings Services ("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. The Fund has adopted
the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus or this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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);
(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;
(vi) make investments in securities for the purpose of exercising
control over or management of the issuer;
(vii) 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;
(viii) 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;
(ix) 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;
(x) 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; or
(xi) make short sales of securities or maintain a short position.
<PAGE>
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 S&P or Baa by 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, interest rate and other
financial futures contracts and related options, 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.
The Fund 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.
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. The Fund has adopted the following fundamental
investment restrictions:
(i) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(ii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iii) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(iv) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(v) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vi) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(vii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 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;
(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 and rules
thereunder;
(v) make investments in securities for the purpose of exercising
control 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--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;
(vii) 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;
(viii) 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; and
(ix) 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.
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 1940 Act, of the Fund's
outstanding voting shares. The Fund has adopted the following fundamental
investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time,
although the Fund may concentrate its investments in
instruments issued by domestic banks in accordance with its
Prospectus and applicable law.
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
(vii) without registration under the Securities Act of 1933;
(viii) 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;
(ix) borrow money, except for temporary purposes where investment
transactions might advantageously require it. Any such loan
may not be for a period in excess of 60 days, and the
aggregate amount of all outstanding loans may not at any
time exceed 10% of the value of the total assets of the Fund
at the time any such loan is made;
(x) purchase securities on margin;
(xi) sell securities short;
(xii) 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; or
(xiii) 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 no
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (v) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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 and AAA by
S&P are judged to be of the best quality (i.e., capacity to pay interest and
repay principal is extremely strong). Bonds rated Aa/AA are considered to be of
high quality (i.e., capacity to pay interest and repay principal is very strong
and differs from the highest rated issues only to a small degree). Bonds rated A
are viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). A Fund
may invest in debt securities that are given an investment-grade rating by
Moody's or S&P, and may also invest in unrated debt securities that are
considered by IMI to be of comparable quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa 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, if so, could 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. 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 or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
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 commitments 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. Securities are disposed of in situations where it is believed that
potential for such appreciation has lessened or that other securities 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:
<TABLE>
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested person" Investment Management Inc. (1995-present);
of the Trust, as defined under the Senior Vice President, Mackenzie Investment
1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present);
800 Hickory Blvd. Chairman, Broyhill Family Foundation, Inc.
Golfview Park-Box 500 (1983-present); Chairman, Broyhill Investments,
Lenoir, NC 28645 Inc. (1997-present); Chairman and President,
Age: 76 Broyhill Investments, Inc. (1983-1997);
Chairman, Broyhill Timber Resources (1983-present);
Management of a personal portfolio of
fixed-income and equity instruments (1983-present);
Trustee of Mackenzie Series Trust (1988-1998);
Director of The Mackenzie Funds Inc. (1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested person" President, Mackenzie Investment Management Inc.
of the Trust, as defined under the (1996-1997); Senior Vice President and
1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V. (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998)
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
</TABLE>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
<TABLE>
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
* The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel
Jr., P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares
(34.67%) and Merrill Lynch Pierce Fenner & Smith For the sole benefit OF ITS
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3RD FL Jacksonville,
FL 32246, owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADministration, 4800 deer lake DR. E, 3RD
FL, Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD FL, Jacksonville, FL 32246, owned of record 733,792.800 shares
(25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE
FBO Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC
Private Bus Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370,
Cooper Station New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 8,648,661.843 shares (30.25%) and Merrill Lynch PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF ITS CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD Floor, Jacksonville, FL 32246, owned of record 6,025,817.607
(21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target
Benefit Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890,
owned of record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn:
Russ Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box
173736, Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and
Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. MUTUAL FUND
OPERATIONS - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800
DEER LAKE DR. E, 3RD FL, Jacksonville, FL, owned of record 33,931.288 shares
(20.64%) and Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD
5/2/94 Martha K Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record
10,022 shares (6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and
Prudential Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy
Shargorodsky Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record
20,520.944 shares (13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E.,
3RD FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert
M. Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E.,
3RD FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL.,
San Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill
Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), SALOMON SMITH BARNEY INC., 333 WEST 34TH ST. - 3RD
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 SHARES (35.64%),
SALOMON SMITH BARNEY INC. 00129805698, 333 WEST 34TH ST. - 3RD Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, OWNED OF RECORD 2,034.101 SHARES (6.71%) AND RAYMOND
JAMES & ASSOC. INC. CSDN DAVID C JOHNSON M/P, 1113 45TH Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith Inc. Mutual Fund Operations - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce
Street, Garden City, MI 48135, owned of record 4,651.187 shares (14.03%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17
Cordes Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%),
May Ann Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of
record 2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham,
Buffalo, NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170TH ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO VYTAUTAS SNIEKUS, 1250 E 276TH St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares
(71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K AISTROPE & MARY SUE JENKINS JT TEN, 1635 N. 106TH Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 389,576.275 shares (13.74%), State Street Bank TTEE FBO ALLISON
ENGINES, 200 NEWPORT AVE., 7TH Floor, North Quincy, MA 02171, owned of record
327,350.589 shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box
83084, Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%),
Harleysville Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438,
owned of record 191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great
Lakes Chemical RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S,
Chicago, IL 60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark
Taper Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049,
owned of record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company
FBO Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST,
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 19,521.431 shares (73.06%), Brown Brothers
Harriman & Co. CUST International Solutions V- Aggressive Growth, Attn: Terron
McGovern, 40 Water St. Boston, MA 02109, owned of record 5,387.835 shares
(20.17%), Brown Brothers Harriman & Co. CUST International Solutions II -
Balanced Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned
of record 1,602.659 shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 32,622.646 shares (61.95%), Brown Brothers
Harriman & Co. CUST International Solutions III - Moderate Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 9,740.980 shares
(18.49%), Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd FL,
Jacksonville, FL owned of record 5,243.316 shares (9.95%), and Brown Brothers
Harriman & Co. CUST International Solutions V - Aggressive Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 3,240.952 shares
(6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot
TTEE Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton,
FL 33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner
& Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 35,889.863 shares (24.70%), Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 26,271.557 shares (18.08%) and
Brown Brothers Harriman & Co. CUST International Solutions III - Moderate
Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management
Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste.
300, Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI,
IMDI and the Trust have adopted a Code of Ethics and Business Conduct Policy
(the "Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as manager and investment adviser to the
other series of Ivy 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,
1997, 1998 and 1999, Ivy Bond Fund paid IMI fees of $800,555, $1,042,273, and
$907,299 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. For the fiscal year ended December
31, 1999, Ivy International Strategic Bond Fund paid IMI fees of $5,823. During
the same period, IMI reimbursed Fund expenses in the amount of $94,971.
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, 1997, 1998 and 1999, Ivy Money Market Fund paid IMI
$83,294, $102,727 and $105,311, respectively. During the same periods IMI
reimbursed Fund expenses in the amount of $83,294, $140,140 and $137,040,
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 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. For each of
the following nine years, IMI will limit such fees to 1.75% of the Fund's
average net assets.
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.
For each of the following nine years, IMI will limit such fees to 1.25% of the
Fund's average net assets.
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 years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Bond Fund $200,364, $177,369, and
$55,002, respectively, in sales commissions, of which $31,911, $23,981, and
$8,759, respectively, was retained after dealer allowances. During the fiscal
year ended December 31, 1999, IMDI RECEIVED $24,786 in CDSCs on redemptions of
Class B shares of Ivy Bond Fund. During the fiscal year ended December 31, 1999,
IMDI received $18,757 in CDSCs on redemptions of Class C shares of Ivy Bond
Fund.
During the fiscal year ended December 31, 1999, IMDI received from
sales of Class A shares of Ivy International Strategic Bond Fund $299 in sales
commissions, of which $54 was retained after dealer allowances. DURING THE
FISCAL YEAR ENDED DECEMBER 31, 1999, IMDI RECEIVED $0 in CDSCs on redemptions of
Class B shares of Ivy International Strategic Bond Fund. During the fiscal year
ended December 31, 1999, IMDI received $0 in CDSCs on redemptions of Class C
shares of Ivy International Strategic 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, banks,
investment advisers, financial institutions and other entities 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 or other party 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, 1999, Ivy Bond Fund paid IMDI
$220,181 pursuant to its Class A plan. During the fiscal year ended December 31,
1999, Ivy Bond Fund paid IMDI $363,123 pursuant to its Class B plan. During the
fiscal year ended December 31, 1999, Ivy Bond Fund paid IMDI $67,951 pursuant to
its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Bond Fund: advertising
$0; printing and mailing of prospectuses to persons other than current
shareholders, $41,309; compensation to the underwriters $0; compensation to
dealers, $32,918; compensation to sales personnel $313,655; interest, carrying
or other financing charges $0; seminars and meetings, $8,229; travel and
entertainment, $31,214; general and administrative, $192,891; telephone, $9,716;
and occupancy and equipment rental, $25,352.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Bond Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $16,858; compensation to underwriters $0; compensation to dealers,
$56,340; compensation to sales personnel, $129,003; interest, carrying or other
financing charges $0; seminars and meetings, $14,085; travel and entertainment,
$12,805; general and administrative, $78,454; telephone, $3,980; and occupancy
and equipment rental $10,327.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Bond Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $3,004; compensation to underwriters $0; compensation to dealers,
$5,202; compensation to sales personnel, $23,130; interest, carrying or other
financing charges $0; seminars and meetings, $1,300; travel and entertainment,
$2,285; general administrative, $14,458; telephone, $720; and occupancy and
equipment rental, $1,904.
During the fiscal year ended December 31, 1999, Ivy International
Strategic Bond Fund paid IMDI $28 pursuant to its Class A plan. During the
fiscal year ended December 31, 1999, Ivy Bond Fund paid IMDI $0 pursuant to its
Class B plan. During the fiscal year ended December 31, 1999, Ivy Bond Fund paid
IMDI $0 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy International Strategic
Bond Fund: advertising $0; printing and mailing of prospectuses to persons other
than current shareholders, $6,607; compensation to underwriters $0; compensation
to dealers, $352; compensation to sales personnel $3,292; interest, carrying or
other financing charges $0; seminars and meetings, $88; travel and
entertainment, $337; general and administrative, $1,888; telephone, $0; and
occupancy and equipment rental, $246.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy International Strategic
Bond Fund: advertising, $0; printing and mailing of prospectuses to persons
other than current shareholders, $0; compensation to underwriters $0;
compensation to dealers, $0; compensation to sales personnel, $0; interest,
carrying or other financing charges $0; seminars and meetings, $0; travel and
entertainment, $0; general and administrative, $0; telephone, $0; and occupancy
and equipment rental $0.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy International Strategic
Bond Fund: advertising, $0; printing and mailing of prospectuses to persons
other than current shareholders, $0; compensation to underwriters $0;
compensation to dealers, $0; compensation to sales personnel, $0; interest,
carrying or other financing changes $0 seminars and meetings, $0; travel and
entertainment, $0; general administrative, $0; telephone, $0; and occupancy and
equipment rental, $0.
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, 1999, Ivy Bond Fund paid MIMI
$102,984 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International
Strategic Bond Fund paid MIMI $9,798 under the agreement.
During the fiscal year ended December 31, 1999, Ivy Money Market Fund
paid MIMI $33,763 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 located at
Via Mizner Financial Plaza, 700 S. Federal Hwy., Boca Raton, Florida, 33432, 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 monthly
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, 1999 totaled $310,628. Such fees and expenses for Ivy International
Strategic Bond Fund for the fiscal year ended December 31, 1999 totaled $439.
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, 1999 totaled $100,169. 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, 1999 for Ivy Bond Fund totaled $131,460. Such fees for
the fiscal year ended December 31, 1999 for Ivy International Strategic Bond
Fund totaled $776. Such fees for the fiscal year ended December 31, 1999 for Ivy
Money Market Fund totaled $26,328.
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, located at
200 East Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida 33301, 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, 1997, 1998 and 1999, Ivy
Bond Fund paid brokerage commissions of $1,361, $0 and $0, respectively.
During the fiscal year ended December 31, 1999, Ivy International
Strategic Bond Fund paid brokerage commissions of $0.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Money Market Fund paid brokerage commission of $0, $0, and $0, 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 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. Pursuant to the Declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. The
Trustees have authorized twenty-one 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 Cundill Value Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next Wave Internet
Fund, as well as Class I shares for Ivy Bond Fund, Ivy Cundill Value 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, Ivy US Blue Chip Fund and Ivy Next
Wave Internet 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 Cundill Value Fund, Ivy
Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next
Wave Internet 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 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 Cundill Value Fund, Ivy
Developing Markets 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 Ivy Next Wave Internet 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 Cundill Value Fund, Ivy Developing Markets 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, IVY US EMERGING GROWTH FUND AND IVY NEXT WAVE INTERNET
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.
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, an
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 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 are 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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in 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 quoted
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 in
accordance with procedures 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. The Funds are not managed for tax efficiency.
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, 1999 was 4.7%. 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 3.65%.
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 Ivy Bond Fund
for the 30-day period ended December 31, 1999 were 7.40%, 7.02% and 6.96%,
respectively. There were no Class I shares outstanding as of December 31,
1999.
The yields for Class A shares of Ivy International Strategic Bond Fund
for the 30-day period ended December 31, 1999 was 3.77% . There were no Class
B, C, or I shares outstanding as of December 31, 1999.
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 tables summarize the calculation of Standardized and
Non-Standardized Return for the Class A, Class B, Class C, and Class I shares of
Ivy Bond Fund and Ivy International Strategic Bond 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 a Fund, the account fee used for purposes
of the following computations is assumed to be the fee that would be charged to
the mean account size of that Fund.
STANDARDIZED RETURN FOR IVY BOND FUND[*]
CLASS A[1] CLASS B CLASS C CLASS I[2]
One year ended December (10.63)% (11.63)% (7.75)% N/A
31, 1999
Five years ended 4.87% 4.76% N/A N/A
December 31, 1999
Ten years ended 6.13% N/A N/A N/A
December 31, 1999
Inception [#] to year 7.20% 3.87% 3.07% N/A
ended December 31, 1999
[8]:
NON-STANDARDIZED RETURN FOR IVY BOND FUND[**]
CLASS A[3] CLASS B CLASS C CLASS I[2]
Year ended December 31, (6.17)% (6.97)% (6.81)% N/A
1999
Five years ended 5.90% 5.09% N/A N/A
December 31, 1999
Ten years ended 6.65% N/A N/A N/A
December 31, 1999
Inception [#] to year 7.57% 4.01% 3.07% N/A
ended December 31, 1999
[4]:
[*] 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, 1999 and
the one, five and ten year periods ended December 31, 1999 would have been
1.46%, (10.63)%, 4.87%, and 6.09%, respectively.
[2] No Class I shares were outstanding during the time periods
indicated.
[3] 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,
1999 and the one, five and ten year periods ended December 31, 1999 would have
been 1.81%, (6.17)%, 5.90%, and 6.61%, respectively.
[4] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
STANDARDIZED RETURN FOR IVY
INTERNATIONAL STRATEGIC BOND FUND[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Inception [#] to year (1.85)% N/A N/A N/A
ended December 31, 1999
[5]:
NON-STANDARDIZED RETURN FOR IVY
INTERNATIONAL STRATEGIC BOND FUND[**]
CLASS A[5] CLASS B[2] CLASS C[3] CLASS I[4]
Inception [#] to year 3.04% N/A N/A N/A
ended December 31, 1999
[5]:
[*] 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.
[#] The inception date for Ivy International Strategic Bond Fund was
May 3, 1999.
[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, 1999 would
have been (19.11)%.
[2] There were no outstanding Class B Shares during the period
indicated.
[3] There were no outstanding Class C Shares during the period
indicated.
[4] 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,
1999 would have been (15.07)%.
[6] 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.
IVY BOND FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy Bond Fund for the periods indicated through December 31, 1999,
assuming the maximum 4.75% sales charge has been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A (10.63)% 26.86% 81.26% 170.95%
Class B (11.63)% 26.16% N/A 24.38%
Class C (7.75)% N/A N/A 11.75%
Class I N/A N/A N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for Ivy Bond Fund for the periods indicated through December 31, 1999,
assuming the maximum 4.75% sales charge has not been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION[*]
Class A (6.17)% 33.18% 90.30% 184.46%
Class B (6.97)% 28.16% N/A 25.38%
Class C N/A N/A N/A N/A
Class I N/A N/A N/A N/A
[*] Until December 31, 1994, MIMI served as investment adviser to Ivy
Bond Fund, which until that date was a series of Mackenzie Series Trust. The
inception date for 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.
IVY INTERNATIONAL STRATEGIC BOND FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy International Strategic Bond Fund for the periods indicated
through December 31, 1999, assuming the maximum 4.75% sales charge has been
assessed.
SINCE INCEPTION[*]
Class A (1.85)%
Class B N/A
Class C N/A
Class I N/A
The following table summarizes the calculation of Cumulative Total
Return for Ivy International Strategic Bond Fund for the periods indicated
through December 31, 1999, assuming the maximum 4.75% sales charge has not been
assessed.
SINCE INCEPTION[*]
Class A 3.04%
Class B N/A
Class C N/A
Class I N/A
[*] The inception date for Ivy International Strategic Bond Fund was
May 3, 1999.
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
EACH FUND'S PORTFOLIO OF INVESTMENTS AS OF DECEMBER 31, 1999, Statement
of Assets and Liabilities as of DECEMBER 31, 1999, STATEMENT OF OPERATIONS FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 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
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 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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 nineteen 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 1, 2000 (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.
Each Fund's Annual Report to shareholders, dated December 31, 1999
(each an "Annual Report"), is incorporated by reference into this SAI. Each
Fund's Annual Report may 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>
53
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION............................................................5
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS....................................5
IVY BOND FUND.........................................................6
INVESTMENT RESTRICTIONS FOR IVY BOND FUND.............................7
IVY INTERNATIONAL STRATEGIC BOND FUND.................................9
INVESTMENT RESTRICTIONS FOR IVY INTERNATIONAL STRATEGIC BOND FUND....12
EQUITY SECURITIES....................................................14
CONVERTIBLE SECURITIES...............................................14
DEBT SECURITIES......................................................15
ILLIQUID SECURITIES..................................................18
FOREIGN SECURITIES...................................................19
DEPOSITORY RECEIPTS..................................................20
EMERGING MARKETS.....................................................21
FOREIGN SOVEREIGN DEBT OBLIGATIONS...................................22
BRADY BONDS..........................................................22
LOAN PARTICIPATIONS AND ASSIGNMENTS..................................23
FOREIGN CURRENCIES...................................................24
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
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...................31
SECURITIES INDEX FUTURES CONTRACTS...................................36
PORTFOLIO TURNOVER............................................................38
TRUSTEES AND OFFICERS.........................................................38
CLASS A 43
CLASS B 45
CLASS C 47
CLASS I 50
ADVISOR CLASS........................................................50
INVESTMENT ADVISORY AND OTHER SERVICES........................................54
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.................54
DISTRIBUTION SERVICES................................................56
CUSTODIAN............................................................57
FUND ACCOUNTING SERVICES.............................................57
TRANSFER AGENT AND DIVIDEND PAYING AGENT.............................58
ADMINISTRATOR........................................................58
AUDITORS 58
BROKERAGE ALLOCATION..........................................................59
CAPITALIZATION AND VOTING RIGHTS..............................................60
SPECIAL RIGHTS AND PRIVILEGES.................................................61
AUTOMATIC INVESTMENT METHOD..........................................62
EXCHANGE OF SHARES...................................................62
RETIREMENT PLANS.....................................................63
SYSTEMATIC WITHDRAWAL PLAN...........................................66
GROUP SYSTEMATIC INVESTMENT PROGRAM..................................67
REDEMPTIONS...................................................................67
NET ASSET VALUE...............................................................69
TAXATION 70
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS..............71
DEBT SECURITIES ACQUIRED AT A DISCOUNT...............................73
DISTRIBUTIONS........................................................74
DISPOSITION OF SHARES................................................74
FOREIGN WITHHOLDING TAXES............................................75
BACKUP WITHHOLDING...................................................75
PERFORMANCE INFORMATION.......................................................75
YIELD ............................................................75
FINANCIAL STATEMENTS..........................................................75
APPENDIX A....................................................................75
<PAGE>
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
commenced operations (all classes) on May 3, 1999.
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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, 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.
Whenever an investment objective, policy or restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall, unless otherwise
indicated, apply to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
Fund's control, will not be considered a violation.
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
Ratings Services ("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. The Fund has adopted
the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus or
this SAI.
(vii)The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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);
(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;
(vi) make investments in securities for the purpose of exercising control over
or management of the issuer;
(vii)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;
(viii) 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;
(ix) 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;
(x) 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; or
(xi) make short sales of securities or maintain a short position
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 S&P or Baa by 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, interest rate and other
financial futures contracts and related options, 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.
The Fund 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.
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. The Fund has adopted the following fundamental
investment restrictions:
(i) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(ii) The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time.
(iii)The Fund will not engage in the business of underwriting securities issued
by others, except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(iv) The Fund will not purchase or sell real estate (which term does not include
securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(v) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by the Prospectus and
this SAI.
(vi) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(vii)The Fund will not concentrate its investments in a particular industry, as
the term "concentrate" is interpreted in connection with the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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 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;
(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 and
rules thereunder;
(v) make investments in securities for the purpose of exercising control 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--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;
(vii)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;
(viii) 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; and
(ix) 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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 and AAA by
S&P are judged to be of the best quality (i.e., capacity to pay interest and
repay principal is extremely strong). Bonds rated Aa/AA are considered to be of
high quality (i.e., capacity to pay interest and repay principal is very strong
and differs from the highest rated issues only to a small degree). Bonds rated A
are viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). A Fund
may invest in debt securities that are given an investment-grade rating by
Moody's or S&P, and may also invest in unrated debt securities that are
considered by IMI to be of comparable quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa 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, if so, could 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 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 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. 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 or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
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 commitments 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. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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:
<TABLE>
<CAPTION>
- -------------------------------------- ----------------------------- -------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
- -------------------------------------- ----------------------------- -------------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested Investment Management Inc. (1995-present);
person" of the Trust, as defined Senior Vice President, Mackenzie Investment
under the 1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present); Chairman,
800 Hickory Blvd. Broyhill Family Foundation, Inc. (1983-present);
Golfview Park-Box 500 Chairman, Broyhill Investments Inc. (1997-present); Chairman
Lenoir, NC 28645 and President, Broyhill Investments, Inc. (1983-1997);
Age: 76 Chairman, Broyhill Timber Resources (1983-present);
Management of a personal portfolio offixed-income and equity
instruments (1983-present); Trustee of
Mackenzie Series Trust (1988-1998); Director of The
Mackenzie Funds Inc. (1988-1995).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested President, Mackenzie Investment Management Inc.
person" of the Trust, as defined (1996-1997); Senior Vice President and
under the 1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
- -------------------------------------- ----------------------------- -------------------------------------------------
- -------------------------------------- ----------------------------- -------------------------------------------------
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
- -------------------------------------- ----------------------------- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSA-TION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
* The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel Jr.,
P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares (34.67%)
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville, FL 32246,
owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares (25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE FBO
Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC Private Bus
Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370, Cooper Station
New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith For
the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607 (21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target Benefit
Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890, owned of
record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn: Russ
Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box 173736,
Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith Inc.
Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit
of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%) and
Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD 5/2/94 Martha K
Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record 10,022 shares
(6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and Prudential
Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy Shargorodsky
Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record 20,520.944 shares
(13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert M.
Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole benefit of
its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%),
Salomon Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170th ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO Vytautas Sniekus, 1250 E 276th St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares (71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account, Attn:
Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison Engines,
200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record 327,350.589
shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box 83084,
Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%), Harleysville
Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438, owned of record
191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great Lakes Chemical
RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S, Chicago, IL
60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark Taper
Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049, owned of
record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company FBO
Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST, International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 19,521.431 shares (73.06%), Brown Brothers Harriman & Co.
CUST International Solutions V- Aggressive Growth, Attn: Terron McGovern, 40
Water St. Boston, MA 02109, owned of record 5,387.835 shares (20.17%), Brown
Brothers Harriman & Co. CUST International Solutions II - Balanced Growth, Attn:
Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record 1,602.659
shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water St. Boston, MA
02109, owned of record 32,622.646 shares (61.95%), Brown Brothers Harriman & Co.
CUST International Solutions III - Moderate Growth, Attn: Terron McGovern, 40
Water Street, Boston, MA 02109, owned of record 9,740.980 shares (18.49%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 5,243.316 shares (9.95%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 3,240.952 shares (6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot TTEE
Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton, FL
33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 35,889.863 shares (24.70%), Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 26,271.557 shares (18.08%) and Brown Brothers Harriman
& Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management Inc.
Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300,
Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST.
IMI, IMDI and the Trust have adopted a Code of Ethics and Business Conduct
Policy (the "Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as manager and investment adviser to the
other series of Ivy 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,
1997, 1998 and 1999, Ivy Bond Fund paid IMI fees of $800,555, $1,042,273, and
$907,299 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. During the fiscal year ended December
31, 1999, Ivy International Strategic Bond Fund paid IMI fees of $5,823. During
the same period, IMI reimbursed Fund expenses of $94,971.
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, 1999, Ivy Bond Fund paid
MIMI $102,984 under the agreement.
During the fiscal year ended December 31, 1999, Ivy International
Strategic Bond Fund paid MIMI $9,798 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, located at
Via Mizner Financial Plaza, 700 S. Federal Hwy., Boca Raton, Florida, 33432, 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, 1999 totaled
$310,628. Such fees and expenses for Ivy International Strategic Bond Fund for
the fiscal year ended December 31, 1999 totaled $439. 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, 1999 for Ivy Bond Fund totaled
$131,460. Such fees for the fiscal year ended December 31, 1999 for Ivy
International Strategic Bond Fund totaled $776.
AUDITORS
PricewaterhouseCoopers LLP, independent public accountants located at 200
E. Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida, 33301, 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, 1997, 1998 and 1999, Ivy
Bond Fund paid brokerage commissions of $1,361, $0 and $0, respectively. During
the fiscal year ended December 31, 1999, Ivy International Strategic Bond Fund
paid brokerage commissions of $0.
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 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. Pursuant to the Declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. The
Trustees have authorized twenty-one 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 Cundill Value Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next Wave Internet
Fund, as well as Class I shares for Ivy Bond Fund, Ivy Cundill Value 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, Ivy US Blue Chip Fund and Ivy Next
Wave Internet 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 Cundill Value Fund, Ivy
Developing Markets 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, Ivy US Emerging
Growth Fund and Ivy Next Wave Internet Fund. Fund (the other nineteen 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.
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, an
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 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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of 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 quoted
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 in
accordance with procedures 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. The Funds are not managed for tax-efficiency.
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, 1999 was 7.89%.
The yield for Advisor Class shares of Ivy International Strategic Bond
Fund for the 30-day period ended December 31, 1999 was 6.64%.
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 year ended December 31, 1999 and the period from the date Advisor Class
shares were first offered (January 1, 1998) through December 31, 1999 was 6.21%
and 3.39%, respectively.
The Standardized Return for Ivy International Strategic Bond Fund
Advisor Class shares for the period from inception (May 3, 1999) through
December 31, 1999 was 3.19%.
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 year ended December 31, 1999 and the period from the date Advisor
Class shares were first offered (January 1, 1998) through December 31, 1999 was
6.21% and 6.49%, respectively.
The Cumulative Total Return for Ivy International Strategic Bond Fund
Advisor Class Shares for the period from inception (May 3, 1999) through
December 31, 1999 was 3.19%.
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
Each Fund's Portfolio of Investments as of December 31, 1999, Statement
of Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in each Fund's December 31, 1999 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>
<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 1, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one 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
twenty 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 1, 2000 (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 Fund's Annual Report to shareholders, dated December 31, 1999 ( the
"Annual Report"), is incorporated by reference into this SAI. The Annual Report
may 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
EQUITY SECURITIES.............................................2
CONVERTIBLE SECURITIES........................................2
DEBT SECURITIES...............................................3
ILLIQUID SECURITIES...........................................5
FOREIGN SECURITIES............................................6
DEPOSITORY RECEIPTS...........................................7
EMERGING MARKETS..............................................7
FOREIGN CURRENCIES............................................8
FOREIGN CURRENCY EXCHANGE TRANSACTIONS........................9
OTHER INVESTMENT COMPANIES...................................10
REPURCHASE AGREEMENTS........................................10
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS............10
COMMERCIAL PAPER.............................................11
BORROWING....................................................11
WARRANTS 11
OPTIONS TRANSACTIONS.........................................11
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...........15
SECURITIES INDEX FUTURES CONTRACTS...........................18
INVESTMENT RESTRICTIONS...............................................20
PORTFOLIO TURNOVER....................................................22
TRUSTEES AND OFFICERS.................................................23
CLASS A 28
CLASS B 30
CLASS C 31
ADVISOR CLASS................................................35
INVESTMENT ADVISORY AND OTHER SERVICES................................38
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.........38
DISTRIBUTION SERVICES........................................41
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
LETTER OF INTENT.............................................52
RETIREMENT PLANS.............................................53
REINVESTMENT PRIVILEGE.......................................57
RIGHTS OF ACCUMULATION.......................................57
SYSTEMATIC WITHDRAWAL PLAN...................................57
GROUP SYSTEMATIC INVESTMENT PROGRAM..........................58
REDEMPTIONS...........................................................59
CONVERSION OF CLASS B SHARES..........................................60
NET ASSET VALUE.......................................................61
TAXATION 62
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS......63
DEBT SECURITIES ACQUIRED AT A DISCOUNT.......................65
DISTRIBUTIONS................................................66
DISPOSITION OF SHARES........................................66
FOREIGN WITHHOLDING TAXES....................................67
BACKUP WITHHOLDING...........................................68
PERFORMANCE INFORMATION...............................................68
FINANCIAL STATEMENTS..................................................74
APPENDIX A............................................................75
<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 shares was October 23,
1993. The inception date for Class C shares was April 30, 1996. The inception
date for Class I shares was October 6, 1994.
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. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also 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. Investors should also be
aware that certain practices, techniques, or instruments could, regardless of
their relative importance in the Fund's overall investment strategy, 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.
IMI invests the Fund's assets in a variety of economic sectors, industry
segments and individual securities to reduce the effects of price volatility in
any one area and to enable shareholders to participate in markets that do not
necessarily move in concert with U.S. markets. IMI seeks to identify rapidly
expanding foreign economies, and then searches out growing industries and
corporations, focusing on companies with established records. Individual
securities are selected based on value indicators, such as a low price-earnings
ratio, and are reviewed for fundamental financial strength. Companies in which
investments are made will generally have at least $1 billion in capitalization
and a solid history of operations.
When economic or market conditions 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 Investors Service, Inc. ("Moody's") or BBB
or higher by Standard & Poors Ratings Services ("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 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.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities 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 and AAA by
S&P are judged to be of the best quality (i.e., capacity to pay interest and
repay principal is extremely strong). Bonds rated Aa/AA are considered to be of
high quality (i.e., capacity to pay interest and repay principal is very strong
and differs from the highest rated issues only to a small degree). Bonds rated A
are viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). 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, if so, could 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 or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
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 Prospectus under
"Summary," 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 outstanding voting shares of the Fund. The
Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified
series of an open-end investment company.
(ii) The Fund will not borrow money, except as permitted under
the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as
permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting
securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities.
(v) The Fund will not purchase or sell real estate (which term
does not include securities of companies that deal in real
estate or mortgages or investments secured by real estate or
interests therein), except that the Fund may hold and sell
real estate acquired as a result of the Fund's ownership of
securities.
(vi) The Fund will not purchase physical commodities or contracts
relating to physical commodities, although the Fund may
invest in commodities futures contracts and options thereon
to the extent permitted by the Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a)
loans of portfolio securities, and (b) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests in indebtedness in accordance with
the Fund's investment objective and policies may be deemed
to be loans.
(viii) The Fund will not concentrate its investments in a
particular industry, as the term "concentrate" is
interpreted in connection with the Investment Company Act of
1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
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;
(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) 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;
(v) purchase securities on margin;
(vi) sell securities short;
(vii) 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;
(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) 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
(x) purchase the securities of any other open-end investment
company, except as part of a plan of merger or
consolidation.
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. 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. The Fund will continue
to interpret fundamental investment restriction (v) 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.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by IMI to have above
average potential for capital appreciation. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities 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:
<TABLE>
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 Concord Street and controls); Director, Burr-Brown Corp.
Wilmington, MA 01887 (operational amplifiers); Director, Mass. High
Age: 76 Tech. Council; Trustee of Mackenzie Series
Trust (1992-1998).
James W. Broadfoot President and Trustee President, Ivy Management, Inc. (1997 -
700 South Federal Highway present); Executive Vice President, Ivy
Suite 300 Management, Inc. (1996-1997); Senior Vice
Boca Raton, FL 33432 President, Ivy Management, Inc. (1992-1996);
Age: 57 Director and Senior Vice President, Mackenzie
[*Deemed to be an "interested person" Investment Management Inc. (1995-present);
of the Trust, as defined under the Senior Vice President, Mackenzie Investment
1940 Act.] Management Inc. (1990-1995); President and
Trustee, Mackenzie Solutions (1999 to 2000).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. (1983-present);
800 Hickory Blvd. Chairman, Broyhill Family Foundation, Inc.
Golfview Park-Box 500 (1983-present); Chairman, Broyhill Investments,
Lenoir, NC 28645 Inc. (1997-present); Chairman and President,
Age: 76 Broyhill Investments, Inc. (1983-1997);
Chairman, Broyhill Timber Resources (1983-present);
Management of a personal portfolio of
fixed-income and equity instruments (1983-present);
Trustee of Mackenzie Series Trust (1988-1998);
Director of The Mackenzie Funds Inc. (1988-1995).
Keith J. Carlson Chairman and Trustee President, Chief Executive Officer and
700 South Federal Hwy. Director, Mackenzie Investment Management Inc.
Suite 300 (1999-present); Executive Vice President and
Boca Raton, FL 33432 Chief Operating Officer, Mackenzie Investment
Age: 43 Management Inc. (1997-1999); Senior Vice
[*Deemed to be an "interested person" President, Mackenzie Investment Management Inc.
of the Trust, as defined under the (1996-1997); Senior Vice President and
1940 Act.] Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President
and Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, Boston
Waban, MA 02168 Ballet; Overseer, Boston Children's Museum;
Age: 76 Trustee, Ralph Lowell Society WGBH; Trustee,
Newton Wellesley Charitable Foundation.
J. Brendan Swan Trustee Chairman and Chief Executive Officer, Airspray
4701 North Federal Hwy. International, Inc.; Joint Managing Director,
Suite 465 Airspray N.V (an environmentally sensitive
Pompano Beach, FL 33064 packaging company); Director, Polyglass LTD.;
Age: 70 Director, Park Towers International; Director,
The Mackenzie Funds Inc. (1992-1995); Trustee,
Mackenzie Series Trust (1992-1998).
Edward M. Tighe Trustee Chief Executive Officer, CITCO Technology
5900 N. Andrews Avenue Management, inc. ("CITCO") (computer software
Suite 700 development and consulting) (1999-2000);
Ft. Lauderdale, FL 33309 President and Director, Global Technology
Age: 57 Management, Inc. (CITCO's predecessor)
(1992-1998); Managing Director, Global Mutual
Fund Services, Ltd. (financial services firm);
President, Director and Chief Executive
Officer, Global Mutual Fund Services, Inc.
(1994-present).
C. William Ferris Secretary/Treasurer Senior Vice President, Secretary/Treasurer and
700 South Federal Hwy. Compliance Officer, Mackenzie Investment
Suite 300 Management Inc. (2000-present); Senior Vice
Boca Raton, FL 33432 President, Chief Financial Officer
Age: 55 Secretary/Treasurer and Compliance Officer,
Mackenzie Investment Management Inc.
(1995-2000); Senior Vice President,
Secretary/Treasurer, Compliance Officer and
Clerk, Ivy Management, Inc. (1994-present);
Senior Vice President, Secretary/Treasurer and
Director, Ivy Mackenzie Distributors, Inc.
(1994-present); Director, President and Chief
Executive Officer, Ivy Mackenzie Services Corp.
(1997-present); President and Director, Ivy
Mackenzie Services Corp. (1996-1997);
Secretary/Treasurer and Director, Ivy Mackenzie
Services Corp. (1993-1996);
Secretary/Treasurer, The Mackenzie Funds Inc.
(1993-1995); Secretary/Treasurer, Mackenzie
Series Trust (1994-1998); Secretary/Treasurer,
Mackenzie Solutions (1999-2000).
</TABLE>
<PAGE>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
<TABLE>
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
<S> <C> <C> <C> <C>
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
* The Fund complex consists of Ivy Fund.
To the knowledge of the Trust as of April 6, 2000, 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, Northern Trust Custodian FBO W. Hall Wendel
Jr., P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares
(34.67%) and Merrill Lynch Pierce Fenner & Smith For the sole benefit OF ITS
CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD FL Jacksonville,
FL 32246, owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD FL, Jacksonville, FL 32246, owned of record 733,792.800 shares
(25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE
FBO Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy Growth with Income Fund, Amalgamated Bank of NY C/F TWU-NYC
Private Bus Lines Pension Fund Amivest Corp Disc Invest Mgr., P.O. Box 370,
Cooper Station New York, NY 10003, owned of record 268,780.923 shares (6.27%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 8,648,661.843 shares (30.25%) and Merrill Lynch PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF ITS CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD Floor, Jacksonville, FL 32246, owned of record 6,025,817.607
(21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target
Benefit Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890,
owned of record 784,722.350 shares (5.36%);
Ivy Pan-Europe Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300, Boca
Raton, FL 33432, owned of record 39,699.515 shares (32.28%) and Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer LAKE DR. E, 3RD FL, Jacksonville, FL, owned of record
15,899.843 shares (12.93%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn:
Russ Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy South America Fund, FTC & Co. Attn: Datalynx #001, P.O. Box
173736, Denver, CO 80217-3736, owned of record 265,549.907 shares (60.24%), and
Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery Street, San Francisco, CA 94104, owned of record 23,189.803 (5.26%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Tech Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. MUTUAL FUND
OPERATIONS - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE
DR. E, 3RD FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Tech Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy Growth with Income Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 180,275.987 shares (12.88%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International II Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its CUSTOMERS, ATTN: FUND ADMINISTRATION, 4800
DEER LAKE DR. E, 3RD FL, Jacksonville, FL, owned of record 33,931.288 shares
(20.64%) and Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD
5/2/94 Martha K Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record
10,022 shares (6.09 %);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 33,931.288 shares (20.64%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 32,915.011 shares (22.07%) and
Prudential Securities Inc. FBO Shargo International Trade Co., Attn: Yuriy
Shargorodsky Pres., 49 Bruce Dr., Holland, PA 18966-2179, owned of record
20,520.944 shares (13.76%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E,
3RD FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, ATTN: FUND ADMINISTRATION, 4800 DEER LAKE DR.
E, 3RD FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E.,
3RD FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert
M. Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund ADMINISTRATION, 4800 DEER LAKE DR. E, 3RD
FL, Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: FUND ADMINISTRATION, 4800 DEER LAKE DR. E.,
3RD FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL.,
San Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill
Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), SALOMON SMITH BARNEY INC., 333 WEST 34TH ST. - 3RD
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 SHARES (35.64%),
SALOMON SMITH BARNEY INC. 00129805698, 333 WEST 34TH ST. - 3RD Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, OWNED OF RECORD 2,034.101 SHARES (6.71%) AND RAYMOND
JAMES & ASSOC. INC. CSDN DAVID C JOHNSON M/P, 1113 45TH Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith Inc. Mutual Fund Operations - SERVICE TEAM, 4800 DEER LAKE DR. E, 3RD FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce
Street, Garden City, MI 48135, owned of record 4,651.187 shares (14.03%),
Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers, Attn:
Fund Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of
record 3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17
Cordes Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%),
May Ann Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of
record 2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham,
Buffalo, NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy Growth With Income Fund, A.G. Edwards & Sons Custodian For Diana H
Pross Rollover IRA Account, 1705 S 170TH ST, Omaha, NE 68130-1204, owned of
record 5,125.948 shares (12.44%), Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 4,700.698 shares (11.41%), Anthony L
Bassano & Marie E Bassano TTEES of the Anthony & Marie Bassano Trust U/A/D
05-25-99, 8934 Bari Court, Port Richey, FL 34668, owned of record 3,567.299
shares (8.66%), IBT CUST IRA FBO VYTAUTAS SNIEKUS, 1250 E 276TH St. Euclid, OH
44132, owned of record 2,946.753 shares (7.15%), Painwebber For The Benefit Of
Painewebber CDN FBO Patricia Cramer Russell, P.O. Box 3321, Weehawken, NJ
07087-8154, owned of record 2,440.579 shares (5.92%), and IBT CUST 403 (B) FBO
Carol E Greivell, 985 N Broadway #67, Depere, WI 54115, owned of record
2,344.830 shares (5.69%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares
(71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K AISTROPE & MARY SUE JENKINS JT TEN, 1635 N. 106TH Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy Pan-Europe Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 10,984.712 shares (36.96%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ
07303-9998, owned of record 4,858.379 shares (16.34%), Painewebber For The
Benefit Of Katherine R January, 101 North Upper Broadway 1906, Corpus Christi,
TX 78401, owned of record 4,061.794 shares (13.66%), and First union Securities
Inc. A/C 7341-7519 FBO Michele Sherman IRA, 111 East Kilbourn Avenue, Milwaukee,
CA 91406-3636, owned of record 1,524.792 shares (5.13%);
Ivy South America Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 10,242.265 shares (53.68%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 2,424.153 shares (12.70%), Susan L McGowan TTEE U/A
DTD Oct 20 1998 Susan L McGowan Trust, 13440 Red Maple Circle North, Ft. Myers,
FL 33903, owned of record 1,493.000 shares (7.82%), Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of
record 1,133.787 shares (5.94%), and Edward R McGowan JR TTEE U/A DTD Oct 20,
1998 Edward McGowan Jr Trust, 13440 Red Maple Circle North, Ft. Myers, FL 33903,
owned of record 1,124.801 shares (5.89%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 389,576.275 shares (13.74%), State Street Bank TTEE FBO ALLISON
ENGINES, 200 NEWPORT AVE., 7TH Floor, North Quincy, MA 02171, owned of record
327,350.589 shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box
83084, Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%),
Harleysville Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438,
owned of record 191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great
Lakes Chemical RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S,
Chicago, IL 60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark
Taper Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049,
owned of record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company
FBO Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST,
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 19,521.431 shares (73.06%), Brown Brothers
Harriman & Co. CUST International Solutions V- Aggressive Growth, Attn: Terron
McGovern, 40 Water St. Boston, MA 02109, owned of record 5,387.835 shares
(20.17%), Brown Brothers Harriman & Co. CUST International Solutions II -
Balanced Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned
of record 1,602.659 shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 32,622.646 shares (61.95%), Brown Brothers
Harriman & Co. CUST International Solutions III - Moderate Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 9,740.980 shares
(18.49%), Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd FL,
Jacksonville, FL owned of record 5,243.316 shares (9.95%), and Brown Brothers
Harriman & Co. CUST International Solutions V - Aggressive Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 3,240.952 shares
(6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Tech Fund, Robert Chapin & Michelle Broadfoot
TTEE Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton,
FL 33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner
& Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy Growth With Income Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 21,860.493 shares (100%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 35,889.863 shares (24.70%), Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 26,271.557 shares (18.08%) and
Brown Brothers Harriman & Co. CUST International Solutions III - Moderate
Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management
Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste.
300, Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy Pan-Europe Fund, Brown Brothers Harriman & Co. CUST International
Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water Street, Boston,
MA 02109, owned of record 24,337.774 shares (45.84%), Brown Brothers Harriman &
Co. CUST International Solutions III - Moderate Growth, Attn: Terron McGovern,
40 Water Street, Boston, MA 02109, owned of record 11,445.187 shares (21.55),
Charles Schwab & Co, Inc. Reinvest Account, Attn: Mutual Fund Dept., 101
Montgomery St. San Francisco, CA 94104, owned of record 8,210.454 shares
(15.46%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 2,932.686 shares (5.52%), and Brown Brothers Harriman & Co. CUST
International Solutions V - Aggressive Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 2,826.147 shares (5.32%);
Ivy South America Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 27,932.029 shares (88.16%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,526.236 shares (11.13%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
As of April 6, 2000, 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 twenty-one Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which 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, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions. Among other things, the Code of Ethics, which applies to portfolio
managers, traders, research analysts and others involved in the investment
advisory process, prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions in certain securities
may not be made, and requires the submission of duplicate broker confirmations
and quarterly and annual reporting of securities transactions. Exceptions to
certain provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate officers or compliance 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 also currently acts as manager and investment adviser to the
other series of Ivy 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 its services at an annual rate of
1.00% of the first $2.5 billion of the Fund's average net assets, reduced to
0.90% for average daily net assets over $2.5 billion.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Fund
paid IMI fees of $22,898,279, $26,278,962 and $23,577,176, 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.
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 years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of the Fund $4,570,823, $457,543, and
$83,199, respectively, in sales commissions, of which $535,279, $50,268, AND
$26,295, RESPECTIVELY, was retained after dealer allowances. During the fiscal
year ended December 31, 1999, IMDI received $450,461 in CDSCs on redemptions of
Class B shares of the Fund. During the fiscal year ended December 31, 1999, IMDI
received $138,421 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 banks,
investment advisers, financial institutions and other entities 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 or other party 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, 1999, the Fund paid IMDI
$3,508,935 pursuant to its Class A plan. During the fiscal year ended December
31, 1999 the Fund paid IMDI $5,222,779 pursuant to its Class B plan. During the
fiscal year ended December 31, 1999, the Fund paid IMDI $1,416,348 pursuant to
its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of the Fund: advertising $0;
printing and mailing of prospectuses to persons other than current shareholders,
$296,168; compensation to underwriters $0; compensation to dealers, $710,294;
compensation to sales PERSONNEL $6,163,761; INTEREST, CARRYING OR OTHER
FINANCING CHARGES $0; SEMINARS AND MEETINGS, $177,574; travel AND ENTERTAINMENT,
$615,908; general and administrative, $3,745,881; telephone, $190,333; and
occupancy and equipment rental, $491,693.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of the Fund: advertising $0;
printing and mailing of prospectuses to persons other than current shareholders,
$91,070; compensation to underwriters $0; compensation to dealers, $722,584;
compensation to sales PERSONNEL $1,900,966; INTEREST, CARRYING OR OTHER
FINANCING CHARGES $0; SEMINARS AND MEETINGS, $180,646; travel AND ENTERTAINMENT,
$189,932; general and administrative, $1,154,082; telephone, $58,680; and
occupancy and equipment rental, $151,500.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of the Fund: advertising $0;
printing and mailing of prospectuses to persons other than current shareholders,
$24,936; compensation to underwriters $0; compensation to dealers, $220,935;
compensation to sales PERSONNEL $513,751; INTEREST, CARRYING OR OTHER FINANCING
CHARGES $0; SEMINARS AND MEETINGS, $55,234; travel and ENTERTAINMENT, $51,350;
general and administrative, $313,307; telephone, $15,884; and occupancy and
equipment rental, $41,115.
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, 1999, the Fund paid MIMI
$220,210 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 located at
Via Mizner Financial Plaza, Ste. 300, 700 S. Federal Hwy., Boca Raton, Florida,
33432, 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, 1999 for the Fund totaled $4,713,633. 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, 1999 FOR THE FUND
TOTALED $2,216,778.
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 located at
200 E. Las Olas Blvd., Ste. 1700, Ft. Lauderdale, Florida, 33301, 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 the Fund's portfolio securities. All
portfolio transactions are effected at the best price and execution obtainable.
Purchases and sales of debt securities are usually principal transactions and
therefore, brokerage commissions are usually not required to be paid by the Fund
for such purchases and sales (although the price paid generally includes
undisclosed compensation to the dealer). The prices paid to underwriters of
newly-issued securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In connection with OTC
transactions, IMI attempts to deal directly with the principal market makers,
except in those circumstances where IMI believes that a better price and
execution are available elsewhere.
IMI selects broker-dealers to execute transactions and evaluates the
reasonableness of commissions on the basis of quality, quantity, and the nature
of the firms' professional services. Commissions to be charged and the rendering
of investment services, including statistical, research, and counseling services
by brokerage firms, are factors to be considered in the placing of brokerage
business. The types of research services provided by brokers may include general
economic and industry data, and information on securities of specific companies.
Research services furnished by brokers through whom the Trust effects securities
transactions may be used by IMI in servicing all of its accounts. In addition,
not all of these services may be used by IMI in connection with the services it
provides to the 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, 1997, 1998 and 1999, the
Fund paid brokerage commissions of $2,987,187, $1,728,009 and $1,354,491,
respectively.
Brokerage commissions vary from year to year in accordance with the
extent to which the Fund is more or less actively traded.
The Fund may, under some circumstances, accept securities in lieu of cash
as payment for Fund shares. The Fund will accept securities only to increase its
holdings in a portfolio security or to take a new portfolio position in a
security that IMI deems to be a desirable investment for the Fund. While no
minimum has been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1 million. The Trust may
reject in whole or in part any or all offers to pay for 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. Pursuant to the Declaration of Trust, the Trustees may
terminate any Fund without shareholder approval. This might occur, for example,
if a Fund does not reach or fails to maintain an economically viable size. The
Trustees have authorized twenty-one 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 Cundill Value Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and Ivy Next Wave Internet,
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, Ivy US Blue Chip Fund and Ivy Next Wave Internet.
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 Cundill Value
Fund, Ivy Developing Markets 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, Ivy US Emerging Growth Fund and IVY NEXT WAVE INTERNET (the other twenty
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 Cundill Value Fund, Ivy
Developing Markets 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, Ivy US
Emerging Growth Fund and Ivy Next Wave Internet:
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 Cundill Value Fund, Ivy
Developing Markets 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, IVY US
EMERGING GROWTH FUND AND IVY NEXT WAVE INTERNET (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.
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, an
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 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 are 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.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in 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 quoted
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 in
accordance with procedures 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 is not managed for tax-efficiency.
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 CLASS C CLASS I[2]
Year ended December 31, 14.09% 15.15% 19.16% 21.66%
1999
Five years ended 12.76% 12.92% N/A 14.51%
December 31, 1999
Ten years ended 11.09% N/A N/A N/A
December 31, 1999
Inception [#] to year 14.43% 12.35% 12.90% 13.31%
ended December 31,
1999[4]:
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B CLASS C CLASS I[2]
Year ended December 31, 21.05% 20.15% 20.16% 21.66%
1999
Five years ended 14.10% 13.17% N/A 14.51%
December 31, 1999
Ten years ended 11.75% N/A N/A N/A
December 31, 1999
Inception [#] to year 14.93% 12.35% 12.90% 13.31%
ended December 31,
1999[4]:
[*] 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 shares was October 23, 1993. The inception
date for Class C shares was April 30, 1996. The inception date for Class I
shares was October 6, 1994.
[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, 1999 and
the one, five and ten year periods ended December 31, 1999 would have been
14.43%, 14.09%, 12.76%, and 11.08%, respectively.
[2] Class I shares are not subject to an initial sales charge or a
CDSC; therefore the Non-Standardized and Standardized Return figures are
identical.
[3] 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,
1999 and the one, five and ten year periods ended December 31, 1999 would have
been 14.93%, 21.05%, 14.10%, and 11.74% respectively.
[4] 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, 1999, assuming the maximum
5.75% sales charge has been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION [*]
Class A 14.09% 82.30% 186.21% 532.43%
Class B 15.15% 83.62% N/A 105.73%
Class C 19.16% N/A N/A 56.13%
Class I 21.66% 96.92% N/A 116.82%
The following table summarizes the calculation of Cumulative Total Return for
the periods indicated through December 31, 1999, assuming the maximum 5.75%
sales charge has not been assessed.
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION [*]
Class A 21.05% 93.42% 203.68% 571.02%
Class B 20.15% 85.62% N/A 105.73%
Class C 20.16% N/A N/A 56.13%
Class I 21.66% 96.92% N/A 116.82%
- ---------------------------
[*] The inception date for the Fund (Class A shares) was April 21, 1986. The
inception date for Class B shares was October 23, 1993. The inception date for
Class C shares was April 30, 1996. The inception date for Class I shares was
October 6, 1994.
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, 1999, Statement
of Assets and Liabilities as of December 31, 1999, Statement of Operations for
the fiscal year ended December 31, 1999, Statement of Changes in Net Assets for
the fiscal year ended December 31, 1999, Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants, which are included
in the Fund's December 31, 1999 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 Post-Effective Amendment No. 110 and incorporated by
reference herein.
(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 Post-Effective
Amendment No. 110 and incorporated by reference herein.
(27) Establishment and designation of Series and Classes (Ivy
Cundill Value Fund -- Class A, Class B, Class C, Class I and
Advisor Class) filed with Post-Effective Amendment No. 113
and incorporated by reference herein.
(28) Establishment and designation of Series and Classes Ivy Next
Wave Internet Fund -- Class A, Class B, Class C, Class I and
Advisor Class) filed with Post-Effective Amendment No. 113
and incorporated by reference herein.
(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
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(23) Supplement to Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy Management, Inc.
(Ivy European Opportunities Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(24) Subadvisory Agreement between Ivy Management, Inc. and
Henderson Investment Management Limited (Ivy International
Small Companies Fund) filed with Post-Effective Amendment
No. 110 and incorporated by reference herein.
(25) Amendment to Subadvisory Agreement between Ivy Management,
Inc. and Henderson Investment Management Limited (Ivy
European Opportunities Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(26) Supplement to Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy Management, Inc.
(Ivy Cundill Value Fund and Ivy Next Wave Internet Fund)
filed with Post-Effective Amendment No. 114 and incorporated
by reference herein.
(27) Subadvisory Agreement between Ivy Management, Inc. and Peter
Cundill & Associates, Inc. (Ivy Cundill Value Fund) filed
with Post-Effective Amendment No. 114 and incorporated by
reference herein.
(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 Post-Effective
Amendment No. 110 and incorporated by reference herein.
(15) Addendum to Amended and Restated Distribution Agreement (Ivy
European Opportunities Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(16) Amended and Restated Distribution Agreement, filed with
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(17) Addendum to Amended and Restated Distribution Agreement (Ivy
Cundill Value Fund and Ivy Next Wave Internet Fund) filed
with Post-Effective Amendment No. 114 and incorporated by
reference herein.
(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
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(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
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(50) Addendum to Fund Accounting Services Agreement (Ivy
International Strategic Bond Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(51) Addendum to Administrative Services Agreement (Ivy
International Strategic Bond Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(52) Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy European Opportunities Fund) filed with
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(53) Addendum to Fund Accounting Services Agreement (Ivy European
Opportunities Fund) filed with Post-Effective Amendment No.
110 and incorporated by reference herein.
(54) Addendum to Administrative Services Agreement (Ivy European
Opportunities Fund) filed with Post-Effective Amendment No.
110 and incorporated by reference herein.
(55) Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy Cundill Value Fund and Ivy Next Wave Internet
Fund) filed with Post-Effective Amendment No. 114 and
incorporated by reference herein.
(56) Addendum to Fund Accounting Services Agreement (Ivy Cundill
Value Fund and Ivy Next Wave Internet Fund) filed with
Post-Effective Amendment No. 114 and incorporated by
reference herein.
(57) Addendum to Administrative Services Agreement (Ivy Cundill
Value Fund and Ivy Next Wave Internet Fund) filed with
Post-Effective Amendment No. 114 and incorporated by
reference herein.
(i) Legal Opinion: Opinion and consent of counsel, filed with
this Post-Effective Amendment No. 115.
(j) Other Opinions: Opinions and consent of independent public
accountants, filed with this Post-Effective Amendment No.
115.
(k) Omitted Financial Statements: Not applicable.
(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 Post-Effective Amendment No. 110 and
incorporated by reference herein.
(35) Supplement to Distribution Plan for Ivy Fund Class B Shares
(Ivy International Strategic Bond Fund) filed with
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(36) Supplement to Distribution Plan for Ivy Fund Class C Shares
(Ivy International Strategic Bond Fund) filed with
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(37) Supplement to Master Amended and Restated Distribution Plan
for Ivy Fund Class A Shares (Ivy European Opportunities
Fund) filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(38) Supplement to Distribution Plan for Ivy Fund Class B Shares
(Ivy European Opportunities Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(39) Supplement to Distribution Plan for Ivy Fund Class C Shares
(Ivy European Opportunities Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference herein.
(40) Form of Amended and Restated Distribution Plan For Ivy Fund
Class B Shares, filed with Post-Effective Amendment No. 107
and incorporated by reference herein.
(41) Amended and Restated Distribution Plan for Ivy Fund Class A
Shares, filed with Post-Effective Amendment No. 111 and
incorporated by reference herein.
(42) Supplement to Master Amended and Restated Distribution Plan
for Ivy Fund Class A Shares (Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund) filed with Post-Effective Amendment
No. 114 and incorporated by reference herein.
(43) Supplement to Amended and Restated Distribution Plan for Ivy
Fund Class B Shares (Ivy Cundill Value Fund and Ivy Next
Wave Internet Fund) filed with Post-Effective Amendment No.
114 and incorporated by reference herein.
(44) Supplement to Distribution Plan for Ivy Fund Class C Shares
(Ivy Cundill Value Fund and Ivy Next Wave Internet Fund)
filed with Post-Effective Amendment No. 114 and incorporated
by reference herein.
(n) 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
Post-Effective Amendment No. 110 and incorporated by
reference herein.
(11) Amended and Restated Plan adopted pursuant to Rule 18f-3
under the Investment Company Act of 1940, filed with
Post-Effective Amendment No. 114 and incorporated by
reference herein.
(p) Codes of Ethics:
(1) Code of Ethics of Mackenzie Investment Management Inc.,
filed with Post-Effective Amendment No. 113 and incorporated
by reference herein.
(2) Code of Ethics of Peter Cundill & Associates, Inc., filed
with Post-Effective Amendment No. 113 and incorporated by
reference herein.
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 and Business Manager to
nineteen series of the Trust, Mackenzie Financial
Corporation, the adviser to Ivy Global Natural Resources
Fund, Henderson Investment Management Limited, the
subadviser to Ivy European Opportunities Fund and a portion
of Ivy International Small Companies Fund, and Peter Cundill
& Associates (Bermuda) Ltd., the subadviser to Ivy Cundill
Value Fund.
The list required by this Item 26 of officers and directors
of Ivy Management, Inc., Mackenzie Financial Corporation,
Henderson Investment Management Limited, and Peter Cundill &
Associates (Bermuda) Ltd., 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. 115 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. 115 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 1st day of May, 2000.
IVY FUND
By: James W. Broadfoot***
---------------------
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. 115 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
JOHN S. ANDEREGG, JR.* Trustee 5/1/00
PAUL H. BROYHILL* Trustee 5/1/00
JAMES W. BROADFOOT*** Trustee and President 5/1/00
KEITH J. CARLSON** Trustee and Chairman 5/1/00
(Chief Executive Officer)
STANLEY CHANNICK* Trustee 5/1/00
C. WILLIAM FERRIS* Treasurer (Chief 5/1/00
Financial Officer)
ROY J. GLAUBER* Trustee 5/1/00
JOSEPH G. ROSENTHAL* Trustee 5/1/00
RICHARD N. SILVERMAN* Trustee 5/1/00
J. BRENDAN SWAN* Trustee 5/1/00
DIANNE LISTER*** Trustee 5/1/00
EDWARD M. TIGHE*** Trustee 5/1/00
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.
*** Executed pursuant to power of attorney filed with Post-Effective Amendment
No. 111 to Registration Statement No. 2-17613.
<PAGE>
EXHIBIT INDEX
Exhibit (i): Opinion and Consent of Dechert Price & Rhoads
Exhibit (j): Opinions and consent of independent public accountants
EXHIBIT (i)
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MASSACHUSETTS 02109-4603
May 1, 2000
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. 115 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 Markets 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. 115"). 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. 115.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
EXHIBIT (j)
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy European Opportunities 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, 1999, the
results of its operations and the changes in its net assets for the period May
3, 1999 (commencement of operations) through December 31, 1999, and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States. 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 audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States, 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 audit, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy Global Science & 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of Ivy International Strategic 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, 1999, the
results of its operations, the changes in its net assets for the period May 3,
1999 (commencement of operations) through December 31, 1999, and the financial
highlights for each of the periods presented, in conformity with accounting
principles generally accepted in the United States. 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 audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States, 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
audit, which included confirmation of securities owned at December 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 November 2, 1998 (commencement of
operations) through December 31, 1998, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards
generally accepted in the Unites States, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC 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, 1999, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE>
EXHIBIT (j) (cont'd)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference and inclusion in this
Post-Effective Amendment No. 115 to the Registration Statement on Form N-1A
(File No. 2-17613, hereafter the "Registration Statement") of our reports dated
February 4, 2000, relating to the financial statements and financial highlights
of Ivy International Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy US
Blue Chip Fund, Ivy US Emerging Growth Fund, Ivy Asia Pacific Fund, Ivy China
Region Fund, Ivy Developing Markets Fund (f/k/a 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 Pan-Europe Fund, Ivy South America Fund,
Ivy Bond Fund, Ivy International Strategic Bond Fund and Ivy Money Market Fund
which appear in the December 31, 1999 Annual Reports to Shareholders, which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and "Auditors"
in such Registration Statement.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
April 27, 2000
