IVY FUND, 497, 2000-09-01

IVY FUND
497, 2000-09-01

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<PAGE> 1

[Ivy Funds Logo]

This is your prospectus from

IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111

August 29, 2000 IVY INTERNATIONAL FUND ADVISOR CLASS SHARES

Ivy Fund is a registered open-end investment company consisting
of eighteen separate portfolios. This Prospectus relates to the
Advisor Class shares of Ivy International Fund (the "Fund"). The
Fund also offers 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 Fund are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

-- CONTENTS
2 Summary

4 Additional information
about principal investment
strategies and risks

6 Management

6 Shareholder information

10 Financial highlights

13 Account application

<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 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
PO Box 3022 Ste. 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>

(Ivy Mackenzie Logo)
<PAGE> 2
[IVY LEAF LOGO]
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IVY INTERNATIONAL FUND
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(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 disciplined investment approach that focuses on:
- analyzing a company's financial statements;
- taking advantage of overvalued or undervalued markets; and
- building a portfolio that is diversified by both region and sector.

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.
<PAGE> 3

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-- 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.

Since there were no Advisor Class shares outstanding as of December 31,
1999, 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
-----------------------------------------------------------

(12.97%) 16.93% 0.07% 48.37% 3.92% 12.65% 16.72% 10.38% 7.34% 21.05%
-----------------------------------------------------------------------------
90 91 92 93 94 95 96 97 98 99
</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.

<TABLE>
<S> <C>
for the periods ending
AVERAGE ANNUAL TOTAL RETURNS* December 31, 1999
-------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
MSCI
EAFE
CLASS A INDEX
------------------------------------------------------------------------
<S> <C> <C>
Past year.......................................... 14.09% 26.96%
Past 5 years....................................... 12.76% 12.83%
Past 10 years...................................... 11.09% 7.01%
</TABLE>

* Performance figures reflect any applicable sales charges.

-- 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.......................................... 0.41%
Total annual Fund operating expenses.................... 1.41%
</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 had no Advisor Class shares outstanding. Percentages
shown are estimates based on expenses for Class A shares.

*** Management fees are reduced to 0.90% for net assets over $2.0
billion, reduced to 0.80% for net assets over $2.5 billion and
reduced to 0.70% for net assets over $3.0 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. 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> <C> <C> <C> <C> <C>
1st $ 144
3rd 446
5th 771
10th 1,691
</TABLE>
<PAGE> 4

[IVY LEAF LOGO]
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IVY INTERNATIONAL FUND
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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 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 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. You could 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
<PAGE> 5

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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 movements). 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 on resale. There is a risk that the Fund will not
<PAGE> 6

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 seventeen 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.

-- PORTFOLIO MANAGER

Sheridan P. Reilly, Senior Vice President and Chief Investment Officer for
International Equities at IMI, is the lead manager for the Fund, supported by
IMI's international equities team (comprised of portfolio managers and research
analysts). Prior to joining IMI in May 2000, Mr. Reilly served as team leader
for institutional international investing and was responsible for $14 billion in
assets at Scudder Kemper Investments, Inc. in New York. While at Scudder Kemper
Investments he was also part of the team that managed the $5.3 billion Scudder
International Fund. Mr. Reilly has 15 years of professional investment
experience. Mr. Reilly holds a masters degree from Gregorian University, Rome,
Italy and is a Chartered Financial Analyst.

Northern Cross Investments Limited ("Northern Cross") served as subadvisor to
the Fund from July 1, 1990 through May 15, 2000 under an Agreement with IMI. For
its services, Northern Cross received a fee from IMI that was 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.

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.
<PAGE> 7

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If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their fair value as determined by IMI in
accordance with procedures approved by the Fund's Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which
the Fund prices its shares. Fair-value pricing under these circumstances is
designed to protect existing shareholders from the actions of short-term
investors trading into and out of the Fund in an attempt to profit from
short-term market movements. When such fair-value pricing occurs, 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.

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.

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<TABLE>
<S> <C>
Minimum initial investment*.............. $10,000
Minimum subsequent investment*........... $250
Initial sales charge..................... none
CDSC..................................... none
Service and distribution fees............ none
</TABLE>

*Minimum initial and subsequent investments for retirement plans are $25.

-- SUBMITTING YOUR PURCHASE ORDER

INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to Ivy International Fund. You
should note on the check your wish to invest in Advisor Class shares (see above
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 the Fund:

- BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the
<PAGE> 8

account registration, Fund number or name, and account number. Mail to one of
the addresses listed on the prior 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 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 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.

OTHER IMPORTANT REDEMPTION INFORMATION:

- 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.

- 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.
<PAGE> 9

--------------------------------------------------------------------------------

-- HOW TO EXCHANGE SHARES

You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "Other 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 7 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 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
<PAGE> 10

generally will be subject to tax as ordinary income only when distributed from
that account.

A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by the Fund during January of the
following calendar year. In certain years, you may be able to claim a credit or
deduction on your income tax return for your share of foreign taxes paid by the
Fund.

Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss, which will be long term or short term, generally depending upon how long
you held your shares.

The Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service that you are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against your U.S. Federal income tax liability.

Fund distributions may be subject to state, local and foreign taxes.

You should consult with your tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund
under applicable state or local law.

FINANCIAL HIGHLIGHTS

The Fund had no Advisor Class shares outstanding at December 31, 1999, and
accordingly, no financial information is presented.
<PAGE> 11

--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------

11
<PAGE> 12

[IVY LEAF LOGO]

--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
<PAGE> 13
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. USE FOR ADVISOR
P.O. Box 3022, Boca Raton, Florida 33431-0922 CLASS ONLY

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 ($10,000 minimum) for $ __________ made payable
to Ivy International Fund. Please invest it in Advisor Class shares.

B. FOR DEALER USE ONLY

Confirmed trade orders: ______________ ________________ ______________
Confirm Number Number of Shares Trade Date
<PAGE> 14

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 in Advisor Class shares of Ivy
International Fund:

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 ($250 minimum) $_____ for each time period indicated
below from my Advisor Class shares of Ivy International Fund:

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 $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 "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> 15

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS SYMBOL CUSIP
----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy International Fund Advisor Class Shares * 465898690
----------------------------------------------------------------------------------------
</TABLE>

*Symbol not assigned as of this printing.
<PAGE> 16

(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 August 29, 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

01IIFADV0800

-- 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.ivyfunds.com.

<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

ADVISOR CLASS SHARES
August 29, 2000

--------------------------------------------------------------------------------

Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of eighteen portfolios, each of which (except for Ivy
International Strategic Bond Fund) is diversified. This Statement of Additional
Information ("SAI") relates to the Advisor Class shares of Ivy International
Fund (the "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 Fund dated August 29, 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 Fund also offers 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.

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. The Annual Report does not
contain any information pertaining to the Fund's Advisor Class shares since they
were not offered until August 29, 2000.

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
SHARE OWNERSHIP..............................................................28
CLASS A ...........................................................28
CLASS B ...........................................................28
CLASS C ...........................................................28
CLASS I ...........................................................29
ADVISOR CLASS.......................................................29
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST.................29
INVESTMENT ADVISORY AND OTHER SERVICES.......................................30
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES................30
DISTRIBUTION SERVICES...............................................31
CUSTODIAN...........................................................32
FUND ACCOUNTING SERVICES............................................32
TRANSFER AGENT AND DIVIDEND PAYING AGENT............................33
ADMINISTRATOR.......................................................33
AUDITORS ...........................................................33
BROKERAGE ALLOCATION.........................................................33
CAPITALIZATION AND VOTING RIGHTS.............................................35
SPECIAL RIGHTS AND PRIVILEGES................................................36
AUTOMATIC INVESTMENT METHOD.........................................37
EXCHANGE OF SHARES..................................................37
RETIREMENT PLANS....................................................37
SYSTEMATIC WITHDRAWAL PLAN..........................................41
GROUP SYSTEMATIC INVESTMENT PROGRAM.................................41
REDEMPTIONS..................................................................42
NET ASSET VALUE..............................................................43
TAXATION ....................................................................44
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.............45
DEBT SECURITIES ACQUIRED AT A DISCOUNT..............................47
DISTRIBUTIONS.......................................................48
DISPOSITION OF SHARES...............................................49
FOREIGN WITHHOLDING TAXES...........................................49
BACKUP WITHHOLDING..................................................50
PERFORMANCE INFORMATION......................................................51
FINANCIAL STATEMENTS.........................................................55
APPENDIX A...................................................................57

<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. The inception date for Advisor
Class shares was August 29, 2000.

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.

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:

---------------------------------------- --------------------------- -------------------------------------------------
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 Frontage Road and controls); Director, Burr-Brown Corp.
Andover, MA 01810 (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 (1999-2000).

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
P.O. Box 2160 Management, inc. ("CITCO") (computer software
Ft. Lauderdale, FL 33064 development and consulting) (1999-2000);
Age: 57 President and Director, Global Technology
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)

------------------------- ---------------------- ----------------------- ---------------------- ----------------------
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
(Trustee) $1,000 N/A N/A $1,000

C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)

* The Fund complex consists of Ivy Fund.

</TABLE>

SHARE OWNERSHIP

To the knowledge of the Trust as of July 31, 2000, no shareholder owned
beneficially or of record 5% or more of the Fund's outstanding shares of any
class, with the following exceptions:

CLASS A

Of the outstanding Class A shares of the Fund:

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 6,604,151.993 (28.02%) and Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 5,894,431.864 shares (25.01%).

CLASS B

Of the outstanding Class B shares of the 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 4,821,992.456 shares (46.02%).

CLASS C

Of the outstanding Class C shares of the 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 1,463,484.222 shares (63.51%);

CLASS I

Of the outstanding Class I shares of the Fund:

State Street Bank TTEE FBO Allison Engines, 200 Newport Ave., 7th
Floor, North Quincy, MA 02171, owned of record 385,681.016 shares (17.84%),
Lynspen and Company For Reinvestment, P.O. Box 83084, Birmingham, AL 35283,
owned of record 233,875.716 shares (10.81%), Harleysville Mutual Ins. Co/Equity,
355 Maple Ave., Harleysville, PA 19438, owned of record 211,973.392 shares
(9.80%), 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 200,959.919 shares (9.29%), Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 196,712.650 shares (9.10%), 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
161,172.067 shares (7.45%), S. Mark Taper Foundation, 12011 San Vincente Blvd.,
Ste 400, Los Angeles, CA 90049, owned of record 139,320.624 shares (6.44%), and
Wendel & Co. A/C 200229, c/o The Bank of New York, Mutual Fund/Reorg Dept., P.O.
Box 1066, Wall St. Station, New York, NY, 10268, owned of record 120,107.664
shares (5.55%).

ADVISOR CLASS

Advisor Class shares of the Fund were first offered on the date set
forth on the first page of this SAI. Accordingly, there were no Advisor Class
shares outstanding as of July 31, 2000.

As of July 31, 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 the Fund.

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 billion of the Fund's average net assets, 0.90% of the
next $500 million in average net assets, 0.80% of the next $500 million in
average net assets and 0.70% of average net assets over $3 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.

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.

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.

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 $4.70 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.

AUDITORS

PricewaterhouseCoopers LLP, independent certified 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.
Purchases and sales of securities on a securities exchange are effected through
brokers who charge a commission for their services. 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 may choose broker-dealers that provide
IMI with research services and may cause a client to pay such broker-dealers
commissions which exceed those other broker-dealers may have charged, if IMI
views the commissions as reasonable in relation to the value of the brokerage
and/or research services. IMI will not, however, seek to execute brokerage
transactions other than at best price and execution, taking into account all
relevant factors such as price, promptness of execution and other advantages to
clients, including a determination that the commission paid is reasonable in
relation to the value of the brokerage and/or research services.

During the fiscal years ended December 31, 1997 and 1998, the Fund paid
brokerage commissions of $2,987,187 and $1,728,009 respectively. For the fiscal
year ended December 31, 1999, the Fund paid a total of $1,354,491 in brokerage
commissions with respect to portfolio transactions aggregating $749,184,745.

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 Declaration of Trust of the Trust permits the Trustees to create
separate series or portfolios and to divide any series or portfolio into one or
more classes. The Trustees have authorized eighteen series, each of which
represents a fund. The Trustees have further authorized the issuance of Class A,
Class B, and Class C shares for Ivy Money Market Fund, and Class A, Class B,
Class C and Advisor Class shares for the Fund and Ivy Asia Pacific Fund, Ivy
Bond Fund, Ivy Pacific Opportunities 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 International Fund II, Ivy International Small Companies Fund, Ivy
International Strategic Bond 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 Cundill Value 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 Fund. Under 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.

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 certified
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 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 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 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 Pacific Opportunities 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 International Fund II, Ivy International
Small Companies 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 (the other seventeen series of the Trust). Shareholders should obtain a
current prospectus before exercising any right or privilege that may relate to
these funds.

AUTOMATIC INVESTMENT METHOD

The Automatic Investment Method, which enables a Fund shareholder to
have specified amounts automatically drawn each month from his or her bank for
investment in Fund shares, is available for all classes of shares, except Class
I. The minimum initial and subsequent investment under this method is $50 per
month (except in the case of a tax qualified retirement plan for which the
minimum initial and subsequent investment is $25 per month). A shareholder may
terminate the Automatic Investment Method at any time upon delivery to 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.

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.

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
have 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 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.

REDEMPTIONS

Shares of the 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 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 Advisor Class accounts of shareholders who
have maintained an investment, including sales charges paid, of less than
$10,000 in the 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 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.

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 Advisor Class shares during the designated period.
Standardized Return quotations for the 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%.

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").

The following table summarizes the calculation of Standardized and
Non-Standardized Return for the Class A shares of the Fund for the periods
indicated. Since there were no Advisor Class shares outstanding as of December
31, 1999, 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 returns for the Fund's Class A and Advisor Class shares would
result from variations in their respective expense structures.

STANDARDIZED RETURN[*]

CLASS A[1]

Year ended December 31, 14.09%
1999

Five years ended 12.76%
December 31, 1999

Ten years ended 11.09%
December 31, 1999

Inception [#] to year 14.43%
ended December 31,
1999[4]:

NON-STANDARDIZED RETURN[**]

CLASS A[2]

Year ended December 31, 21.05%
1999

Five years ended 14.10%
December 31, 1999

Ten years ended 11.75%
December 31, 1999

Inception [#] to year 14.93%
ended December 31,
1999[3]:

[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%.

[**] 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.

[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] 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.

[3] 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%

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%

[*] The inception date for the Fund (Class A shares) was April 21, 1986.

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 Certified Public 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.